Main Macro Economic Objectives PDF

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Main Macro economic objectives. Consider how Government plans to increase Aggregate Demand may impact each of the Macro Economic objectives.
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Main Macro economic objectives. Consider how Government plans to increase Aggregate Demand may impact each of the Macro Economic objectives. Macroeconomics associates themselves in a way with aggregate demandwhich is defined as the sum level of spending within an economy, it is a great difference to microeconomics as it looks a society and the government. Macroeconomics examines the performance and behaviour of the entire economy, it tends to focus on aggregate developments within society which have an effect on the economy, such as economic growth, unemployment, the balance of payments position and inflation. The four main economic objectives relate to this and they are stable economic growth, low unemployment, low inflation and last of all satisfactory balance of payments position, they all tie in with one another in one way or another. These macroeconomic objectives are what many political parties base their manifestos around when it comes to elections as these are issues which tend to influence the electorate as the majority of society want to know what the government is going to do to try to achieve these four main macroeconomic objectives. Aggregate Demand is the total spending and demand on goods and services made within a country. The Government has plans in place to try to increase aggregate demand and these can have both a positive and negative impact on the main macroeconomic objectives. Low Unemployment is one of the key macroeconomic objectives. If low unemployment became a prominent feature of society, it would have a benefit on many citizens as well as the economy. It would mean that resources and skills were no longer being squandered as the skillset of those now in jobs will be used and they will have more disposable income. They will also have higher self-esteem and morale which can help to prevent and treat and underlying mental health issues. The third bonus of low unemployment is that the government wouldn’t have to be paying out as many unemployment benefits as these are a strain on government’s revenues. If unemployment levels were to reduce then there would be an apparent growth in national output and there would also be increased government spending on social welfare. It has been found that there is a lack of demand within the economy as people aren’t buying that many goods and not using the services available to them thus this shows that people do not have a lot of disposable income which shows that they aren’t getting paid very much and additionally illustrates the fact that unemployment is an issue which needs to be dealt with. If low unemployment is achieved then the output would then exceed potential which would, in turn, would permit inflation and an even further increase in wages, thus having amazing benefits for society. Hence, if low unemployment were to be achieved then all parts of the economy and society would benefit from it as it would promote stable economic growth. Stable economic growth is another of the main macroeconomic objectives. Economies tend to go through cycles of booms and recessions within the

economy, economic growth is defined as the rate at which national income is growing and at present, the United Kingdom is presently delighting in a period of continued growth. The British economist, John Maynard Keynes, asserts that economic growth is mostly self-adjusting due to the fact it travels through a cycle of ‘booms or busts’. Economic Growth is predominantly measured by the yearly percentage rate change of a nation’s Gross Domestic Product (GDP). If the government were to increase aggregate demand it would have a positive effect on economic growth as it would cause an increase in economic growth, therefore, it would help to achieve one of the main macroeconomic objectives. Increasing economic growth would have many positive benefits, some of them include that it would facilitate the achievement of low inflation and low employment; cause an increase in national output and input; and furthermore it would increase citizens incomes and tax revenues which would cause the subsidize of merits and public goods which will in turn increase standards of living and help to fight inequality- in particular income and employment inequality- therefore having an amazing effect on society as well as the economy, not to mention the effect that it would have on inflation. Low inflation is another of the main macroeconomic objectives. Inflation can be defined as the general level of all prices and wages. There are several misfortunes associated with high inflation, some of these include the cost of resources will increase and they will become very expensive, the economy as a whole will be uncertain and we will also encounter trade problems as when inflation is high we tend to become less competitive. A low inflation rate betters the wellbeing of the general public. It also lessens uncertainty, and uncertainty has been found to have quite an adverse effect on anticipated profits from investment which means it also has harmful effects on long-term growth. An uncertain economy has an effect on the competent allocation of resources as well as it causing economic growth to drop, so, a low inflation rate will cause quite the opposite to be the case. When inflation is low, consumers and businesses are more likely to make long-range dispositions as they feel certain that the purchasing power of their money will hold and won’t be gradually worn down year after year. Therefore increasing aggregate demand will have a positive effect on the macroeconomic objective of low inflation and it will also aid a satisfactory balance of payments position to become possible. A satisfactory Balance of Payments is a fourth macroeconomic objective. The Balance of Payments account matriculates all movements of money in and out of a country. It is important to maintain a satisfactory balance of payments as a shortfall in the Balance of Payments can cause several problems. For example, the exchange rate can fall and this can have an effect on our trade with other countries and foreign investments and a decrease in foreign exchange reserves and it can also cause interest rates to suddenly increase. Within the UK economy, the amount of exported goods and services in a normal financial year is expected to make up around 25-30% of the total Gross Domestic Product. If a satisfactory

balance of payments does not exist then two potential problems may arise. The first is that the Balance of Payments will enter a deficit and this means that there will be a severe lack of foreign currencies and this means that the government will then have to borrow money from other countries, and if this were to go on for a prolonged period of time debts will just mount up which will cause the interest to be paid back to increase. The second problem to arise due to an unsatisfactory balance of payments is that the exchange rate will fall, and this is a problem for the government if they do not correct this then it can cause the price of imports to increase drastically and it could also encourage inflation. In conclusion, there are four macroeconomic objectives. The Benefits of low unemployment are better health, the government would have to spend less money on benefits and people would spend more money which in turn would increase wages. An increase in AD increases economic growth and this promotes income inequality to reduce. Low inflation means that there would be better competition and a satisfactory balance of payments, as well as high inflation which means fewer investments. A satisfactory balance of payments would cause a fallen exchange rate which means less foreign exchange and would cause interest rates to increase, a fallen exchange rate means the price of imports would increase substantially. Therefore the governments' plans to increase aggregate demand would have a positive influence on all of the four macroeconomic objectives....