The main objectives of government macroeconomic policy: economic growth, price stability, minimising unemployment and a stable balance of payments on current account
Governments aim to manage the whole economy by pursuing four goals: steady growth in output, stable prices, low unemployment, and a balanced flow of money from trade with other countries.
Real World
After the 2008 financial crisis, the UK government faced a trade-off: cutting interest rates to boost growth risked pushing inflation above the Bank of England's 2% target, illustrating why all four objectives are rarely achieved simultaneously.
Exam Focus
When asked to 'explain' an objective, always link the policy tool used to the target outcome for full marks.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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