• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

What are the government objectives? Explain why each is important and how the government can achieve each objective.

Extracts from this document...

Introduction

Matthew Halpin 3 May, 2007 What are the government objectives? Explain why each is important and how the government can achieve each objective. The Government primary economic objective is to achieve economic stability. In order to achieve this economic stability the government focus on achieving four principle objectives. These objectives are; to achieve equilibrium in the balance of payments, to keep unemployment levels low, to keep inflation levels low and for overall growth of the economy to be achieved. The various tools that the government has to 'manipulate' the economy to achieve these objectives include; interest rates, the tax system, exchange rates and their own spending. I will begin by looking at the objective of keeping unemployment levels low. Firstly, what is unemployment? This is the problem encountered when there are people able and willing to work but are unable to find jobs. Any economy facing mass unemployment has a major economic and social problem on its hands; therefore making it one of a government's primary objectives to keep levels as low as possible. The economic problem lies in the fact that scarce factors of production are lying under-utilised and wasted. Consumers want goods and services; workers want to provide them; factories and workplaces are probably lying idle. ...read more.

Middle

The fiscal policy too can be used through changes in the levels and direction of government spending and through changes in taxation to achieve low levels of inflation. It can do this through taxation by reducing taxes. This would increase household's disposable incomes and therefore personal consumption. This too would result in increased profitability for firms and therefore the level of investment to increase. As a result of this firms could reduce prices due to increased profitability for firms this increasing the level of investment. The government can also attempt to control inflation with the implementation of contractionary policies. Strict control of the growth money supply reduces aggregate demand and pressures in the labour market. Contractionary polices include price and income policies which can be used to control inflationary pressures for short periods of time. Inflation levels are also important as they also affect unemployment levels in several ways. If inflation levels are high this would lead to decreases in household's disposable incomes as the cost of goods and prices generally increase therefore reducing the amount of money to spend on firms goods and services this reducing the aggregate demand for the economy. This will result in a decrease of companies profits and/or sales revenue and bring about increases in their costs as stock is being produced however it is not being sold, or less is being sold. ...read more.

Conclusion

Another benefit for import controls is the so-called infant industry argument. For example, if the government wanted to develop a new industry but import competition was so fierce that no entrepreneurs would be prepared to risk his or her capital. Applying import controls would allow such a new firm to make a good start. Eventually, import controls could be removed as the industry matured and is able to compete successfully on world markets. The government's fourth final objective is to achieve and sustain economic growth. Economic growth is defined as increase in output and real incomes and is usually measured using gross domestic product (GDP). The government could take to various measures to obtain economic growth. The government could attract further investment; this would be either generated domestically or from abroad. This additional investment would increase the amount of capital per person in the UK and too increase productivity in the economy. They could also enhance economic growth with education and training, this would also increase human capital, consequently making workers more productive and labour markets more flexible. Changes in technology could also lead to the availability of bigger and better machinery, and help create better ways of managing people. The government could also encourage and increase economic through the strengthening of alliances with other countries and encouraging exports to new markets. This would increase demand for our country's products and in turn increase economic growth. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Macroeconomics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Macroeconomics essays

  1. Peer reviewed

    How can inflation be reduced?

    5 star(s)

    An exchange rate is the value of a specific currency in the foreign currency market. For example the value of the Japanese Yen in comparison to the American Dollar. There are two types of exchange rates, the majority of countries have a floating exchange rate, this means it is determined

  2. Peer reviewed

    Using an appropriate diagram explain how a government may attempt to close a deflationary ...

    4 star(s)

    This is because an initial money injection sets off spending from other people. For example, a firm spends $200 million on a new warehouse. The firm would pay contractors to build the warehouse. This $200m paid to contractors would be an increase in aggregate demand.

  1. Explain what the main macroeconomic policy objectives are and why are there problems when ...

    When incomes and spending are growing there is an increase in the demand for imports. Unless this is matched by a rise in export sales, the trade balance in goods and services will worsen. Full employment is achieved when the labour market has reached a state of equilibrium, when those

  2. With the aid of diagrams, illustrate the causes if inflation and deflation, and by ...

    (Sloman, J. and Sutcliffe, M., 2001, p534). This will, therefore, affect companies who rely on the global economy. They will face difficulties to exporting products and selling them abroad. They will also face increased competition from imports so may even struggle to sell their products to the home market.

  1. What are the Government's main economic objectives?

    This may be through better education or through encouraging businesses to offer further training to their employees. Thirdly the Chancellor could try to bring about technological changes and progressions through encouraging innovation within the workplace. This may be achieved through incentive schemes to promote new business start-up and the welcoming of new technologies.

  2. Comparing the effects of immigration on GDP in Malaysia, Japan and South Africa.

    These have raised the urgency of Japan to reduce labor shortages. In response, the government has begun to consider relaxing restrictions on employment of certain categories of workers for which there are serious labor shortages. Therefore, this causes the increase in the immigrants to Japan.

  1. How have the Rates of Inflation in the UK Changed Since the Monetary Policy ...

    Graph 4 This graph shows how interest base rates have changed since 1990 and there is a very clear trend which shows that the base rates were falling at the beginning of the decade and then fluctuating at a far lower level for the rest of the time.

  2. Budget 2004-05 and Economic Analysis of Pakistan

    Foreign Loan Repayments 45978 111258 51081 Servicing Domestic Debt 170500 161520 170209 Others 14847 18499 41653 Foreign Economic Aid 61 61 60 Transfer Payments 62058 65026 65412 General Services 1639 1644 1727 Basic Research 404 577 566 R&D General Public Services 2114 2187 2453 Administration of General Public Service 189

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work