The National and International Economy
Government Objectives;
Prices Stability;
- Inflation is a rise in the general level of prices
- Governments usually aim for a low and stable rate of inflation not complete stability; the
Bank of England has the target of reaching 2% inflation with a 1% margin either way
- Governments aim to achieve an inflation rate at or below the level of competitors’ because
otherwise it can mean a higher price for exports and then a loss of sales by UK businesses to
other countries. Stable inflation also makes it easier for firms to plan and encourages
investment
- Recently inflation has been relatively subdued compared to historical standards
High Level of Employment;
- Full employment occurs when all who want a job have one at a given wage rate, it does not
mean zero unemployment
- UK governments now tend to aim to reduce unemployment to an acceptable level rather
than aiming for full employment
- Employment has a number f significant advantages; most people earn higher incomes from
employment than benefits, when employment is high output and living standards are high
and unemployment imposes costs on the unemployed and wider society
Sustainable Rate of Economic Growth;
- Economic growth is measured by increases in real gross domestic product (GDP) which is a
measure of the value of the goods and services produced in an economy over the period of a
year when the effects of inflation have been removed
- Economic growth brings a number of advantages, particularly higher standards of living and
more goods and services
- However economic growth may bring disadvantages such as pollution and the depletion of
non-renewable resources
- The trade cycle illustrates how after periods of strong growth negative or weak growth
follows, all governments try to eliminate this cycle and want strong stable growth that
doesn’t ignite inflation
Balance of Payments;
- Records all the flows of money into and out of the UK
- It is split into three; the Current Account, the Capital Account and the Financial Account, the
Current Account being most important as it measures in terms of exports and imports of
goods and services
- Usually attempt to achieve and equilibrium or surplus on the current account balance of
payments as it means that the value of exports going out is higher than imports coming in
- A deficit means that more money is leaving the country than coming in
Government Objectives;
Prices Stability;
- Inflation is a rise in the general level of prices
- Governments usually aim for a low and stable rate of inflation not complete stability; the
Bank of England has the target of reaching 2% inflation with a 1% margin either way
- Governments aim to achieve an inflation rate at or below the level of competitors’ because
otherwise it can mean a higher price for exports and then a loss of sales by UK businesses to
other countries. Stable inflation also makes it easier for firms to plan and encourages
investment
- Recently inflation has been relatively subdued compared to historical standards
High Level of Employment;
- Full employment occurs when all who want a job have one at a given wage rate, it does not
mean zero unemployment
- UK governments now tend to aim to reduce unemployment to an acceptable level rather
than aiming for full employment
- Employment has a number f significant advantages; most people earn higher incomes from
employment than benefits, when employment is high output and living standards are high
and unemployment imposes costs on the unemployed and wider society
Sustainable Rate of Economic Growth;
- Economic growth is measured by increases in real gross domestic product (GDP) which is a
measure of the value of the goods and services produced in an economy over the period of a
year when the effects of inflation have been removed
- Economic growth brings a number of advantages, particularly higher standards of living and
more goods and services
- However economic growth may bring disadvantages such as pollution and the depletion of
non-renewable resources
- The trade cycle illustrates how after periods of strong growth negative or weak growth
follows, all governments try to eliminate this cycle and want strong stable growth that
doesn’t ignite inflation
Balance of Payments;
- Records all the flows of money into and out of the UK
- It is split into three; the Current Account, the Capital Account and the Financial Account, the
Current Account being most important as it measures in terms of exports and imports of
goods and services
- Usually attempt to achieve and equilibrium or surplus on the current account balance of
payments as it means that the value of exports going out is higher than imports coming in
- A deficit means that more money is leaving the country than coming in
