What are the macroeconomic objectives?
- Economic growth
- Unemployment and employment
- Inflation and deflation
- The balance of payments
- Government budgets
- The environment/sustainability
- Income distribution
What is economic growth?
Rate of change of output.
It is often measured by GDP.
What does GDP stand for?
Gross Domestic Product.
It is the standard measure of a country’s output.
What is GNI?
Gross National Income.
GNI adds income earned by UK residents or businesses from abroad and subtracts profits earned by foreign companies sent back to their parent companies.
What is the relationship between employment and tax revenue?
Higher unemployment reduces tax revenue and increases welfare benefits.
What inflation rate does the government aim for?
The government wants inflation to be at 2%.
What does a current account surplus indicate about an economy?
Economies where the current account is in surplus consistently are seen to be strong economies.
What does a current account deficit indicate about an economy?
Economies where the current account is in a deficit consistently are seen to be weak.
What is the relationship between tax revenue and government spending?
It is equal to tax revenue minus government spending.
Why should the government keep its budget sustainable?
To avoid high national debt.
- The environment
- want the environment to be better
- lower pollution
- environmentalists are anti growth as they believe increased economic activity damages the planet
- pro-growth economists say increases in output and improvements in tech allow economies to clean up the environment and reduce pollution
- Inequality in Income distribution
- equality in terms of wealth
- can be positive as it provides incentive for people to work hard and take economic risks such as starting a business
- others argue income inequality is negative and everyone should have a fair standard of living
What is progressive tax?
The more you earn, the more tax you play
The Laffer Curve
A theoretical concept that illustrates the relationship between tax rates and the amount of government revenue collected
Does inflation impact tax brackets?
No
What are nominal values?
Values that are NOT adjusted for inflation
What are real values?
Values that are adjusted for inflation
