LU5 Chapter 13: Measuring the performance of the economy
LO1: Explain the five main macroeconomic objectives
LO2: Define the gross domestic product (GDP)
LO3: Explain the difference between nominal GDP and other national accounting
concepts
LO4: Measure employment and unemployment
LO5: Measure the consumer price index
LO6: Measure the links with the rest of the world through the balance of payments
LO7: Explain the measures of inequality in income distribution in the South African
context
, LO1: Explain the five main macroeconomic objectives
1. Economic growth
In growing economy – total production of goods and services increases from
one period to next
If population growing but no economic growth not enough jobs and low
living stds
Expressed in GDP
2. Full employment
Ideal: county’s factors of production to be fully employed – labour
Macro level: unemployment is a threat to social and political stability
Economic growth can help unemployment levels decrease
Measure using unemployment
3. Price stability
Objective is to keep inflation as low as possible
Measure using consumer price index
4. External stability/ balance of payments
High degree of interdependence btw countries
Must balance imports with exports (earn foreign currency by exporting to pay
for imported goods)
Measure using balance of payments
5. Equitable (socially acceptable) distribution of income
Highly unequal distribution of income leads to social and political conflict
NB effects on structure and development of the economy
Measure using the Lorenz curve, Gini coefficient or the quantile ratio
LO1: Explain the five main macroeconomic objectives
LO2: Define the gross domestic product (GDP)
LO3: Explain the difference between nominal GDP and other national accounting
concepts
LO4: Measure employment and unemployment
LO5: Measure the consumer price index
LO6: Measure the links with the rest of the world through the balance of payments
LO7: Explain the measures of inequality in income distribution in the South African
context
, LO1: Explain the five main macroeconomic objectives
1. Economic growth
In growing economy – total production of goods and services increases from
one period to next
If population growing but no economic growth not enough jobs and low
living stds
Expressed in GDP
2. Full employment
Ideal: county’s factors of production to be fully employed – labour
Macro level: unemployment is a threat to social and political stability
Economic growth can help unemployment levels decrease
Measure using unemployment
3. Price stability
Objective is to keep inflation as low as possible
Measure using consumer price index
4. External stability/ balance of payments
High degree of interdependence btw countries
Must balance imports with exports (earn foreign currency by exporting to pay
for imported goods)
Measure using balance of payments
5. Equitable (socially acceptable) distribution of income
Highly unequal distribution of income leads to social and political conflict
NB effects on structure and development of the economy
Measure using the Lorenz curve, Gini coefficient or the quantile ratio
