The Economics of the Government
The Economics of the Government
With regards to macro-economics, the government has four major objectives: Low unemployment, price stability, economic growth that is both and strong and sustainable, and a solid equilibrium. These objectives are evident across recent economically successful nations. We will look into how these objectives affect the economy as a whole. We will also look at limitations that arise when governments attempt to simultaneously achieve in these objectives.
How do these objectives of Macro-economic policy affect the economy?
Low Unemployment:
High employment levels of a country are a general indicator of how well they are off when it comes to economic success. If there are fewer people with jobs, then they have less disposable income to spend on investments. Economists call unemployment a lagging indicator of the economy, as the economy usually improves before the unemployment rate starts to rise again. However, unemployment causes a sort of ripple effect across the economy (Hudson, 2013)
Price Stability:
The phenomenon known as inflation is generally regarded as a gradual and sustained rise of the average level of prices. It is measured on an annual rate by the Retail Price Index. Governments will tend to try to keep the inflation rate percentage low. A popular methodology to controlling inflation is interest rates. Like inflation, interest rates also affect the RPI directly. Inflation has been known to heavily affect approval rates of presidency and other government figureheads, as well as affect the outcomes of elections. Indeed, the general public has a great distaste for inflation too. A look at public opinion polls reveals that inflation at times can be viewed as the most important national problem (Shiller, 1996).
Strong and Sustained Economic Growth:
Gross Domestic Product (GDP) is the general measure of economic growth. Growth changes are marked quarterly, as a comparison to the past change and as an annual percentage as
With regards to macro-economics, the government has four major objectives: Low unemployment, price stability, economic growth that is both and strong and sustainable, and a solid equilibrium. These objectives are evident across recent economically successful nations. We will look into how these objectives affect the economy as a whole. We will also look at limitations that arise when governments attempt to simultaneously achieve in these objectives.
How do these objectives of Macro-economic policy affect the economy?
Low Unemployment:
High employment levels of a country are a general indicator of how well they are off when it comes to economic success. If there are fewer people with jobs, then they have less disposable income to spend on investments. Economists call unemployment a lagging indicator of the economy, as the economy usually improves before the unemployment rate starts to rise again. However, unemployment causes a sort of ripple effect across the economy (Hudson, 2013)
Price Stability:
The phenomenon known as inflation is generally regarded as a gradual and sustained rise of the average level of prices. It is measured on an annual rate by the Retail Price Index. Governments will tend to try to keep the inflation rate percentage low. A popular methodology to controlling inflation is interest rates. Like inflation, interest rates also affect the RPI directly. Inflation has been known to heavily affect approval rates of presidency and other government figureheads, as well as affect the outcomes of elections. Indeed, the general public has a great distaste for inflation too. A look at public opinion polls reveals that inflation at times can be viewed as the most important national problem (Shiller, 1996).
Strong and Sustained Economic Growth:
Gross Domestic Product (GDP) is the general measure of economic growth. Growth changes are marked quarterly, as a comparison to the past change and as an annual percentage as
References: Paul Hudson – How Unemployment Rates Affect the Economy – Date Retrieved: 12th March 2015 - http://elitedaily.com/news/business/how-unemployment-rates-affect-the-economy/ Tejvan Pettinger – Factors Affecting Economic Growth – Date Retrieved: 12th March 2015 - http://www.economicshelp.org/blog/2671/economics/factors-affecting-economic-growth/ Dr. Econ – How Does Inflation Affect Economies? - Date Retrieved: 12th March 2015 - http://www.frbsf.org/education/publications/doctor-econ/2006/march/inflation (Macks Advisory) Professor James Mirlees in Article “Australia 's Problems With Economic Equilibrium” - Australia 's Problems With Economic Equilibrium – Date Retrieved: 14th March 2015 - https://www.macksadvisory.com.au/news/australias-problems-economic-equilibrium-0 Capital Markets Authority – What is the role of Capital Markets in an economy? - Date Retrieved: 14th March 2015 http://www.cma.or.ke/index.php?option=com_content&view=article&id=11:what-is-the-role-of-capital-markets-in-an-economy&catid=11&Itemid=217