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Which two objectives of macroeconomic policy do you consider to be the most important for the UKGovernment to pursue at the start of the 21st Century? Justify your answer.

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Introduction

Economics Essay Feb '02 Which two objectives of macroeconomic policy do you consider to be the most important for the UK Government to pursue at the start of the 21st Century? Justify your answer. Several macroeconomic policies exist that the government could purse to aid the UK economy at the start of the twenty first century, however given the choice of two out of the six possibilities, the decision is a difficult one. These six are the environment, balance of payments, income redistribution, unemployment, inflation and growth. Currently the policies in the greatest need are the environment, balance of payments and growth. The environment however, is not one of the highest priorities as it stands. The current deficit on the current account is at its highest since records began in 1697, and so it may be necessary to rectify this soon, although with the continued spending and consequent borrowing from the public, the Government can afford to have this deficit, as it knows that it can always borrow money. ...read more.

Middle

For example, growth has created a large pool of migrant workers, wandering from job to job in different parts of the country. This has resulted in soaring crime rates and divorce rates, as well as stress related illnesses. Therefore the Government must intervene, and make it easier for people to go from job-to-job, therefore pursuing the much needed economic growth whilst at the same time taking precautions against its costs. Also, with the speculation about war with Iraq, ensuring the sustainability of economic growth will be difficult, and so for this reason it is vital that the government pursue this objective. However, if economic growth is followed up, the discovery of more fossil-fuels or generally non-renewable resources is necessary or much-needed renewable technology, such as wind or hydro-electric power as a means of fuelling the country. Rather than solely economic growth, which will undoubtedly arise, the government should instead be pursuing the development of such renewable resources, in order that the problems associated with growth are kept at a minimum. ...read more.

Conclusion

Secondly, 'menu costs', which are those occurred by firms, such as shops and restaurants, who have to change the costs of their visible goods, to be able to compete with other stores. Psychological and political costs also occur, whereby people believe that they are far worse off, even if their incomes rise by more than the rate of inflation. The distribution of income and wealth are also disturbed meaning that the social order is profoundly affected. Also, if left uncontrolled, problems will arise concerning the balance of payments, whereby if inflation rises faster in the UK than in other countries, and the value of the pound does not change on foreign currency markets, then exports will become less competitive and imports more competitive. The result will be a loss of jobs in the domestic economy and lower growth. Therefore, at the start of the twenty-first century, the evidence shows that the two most important objectives to be pursued by the Government are economic growth and inflation. ...read more.

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