What are the current targets of macroeconomic policy in the UK and how can they be achieved?

Authors Avatar

Question 2

What are the current targets of macroeconomic policy in the UK and how can they be achieved?

The United Kingdom is a highly developed country; it’s the fifth largest economy in the world, and the third most populous country in Europe with a population of over 60 million people. The UK has a very sound macroeconomics system with four main objectives which helps sustain its status as a G8 member.

The macroeconomic policy in the UK is influenced by two set of forces, the market by looking at supply and demand and those induced by government intervention. As a whole macroeconomic objectives in the UK are concerned with the overall performance of the economy. It relates to high economic growth, relatively stable price level and low and stable level of unemployment in addition the last goal is related to the balance of payments and the exchange rate may be distinguished, but it has no immediate or lasting advantage to the country of its payment position. I will deal with each goal in turn.

Economic growth is a desirable objective, it’s the major cause of rising living standards its has been a dominant forces for industrial nations over 200 years. Even small differences in growth rates can lead to large differences in income per head due to the power of compound interest. Since the end of the 2nd world war the rate if economic growth has averaged 2½ % per annum. The figure may be low when compared with some other countries. If Britain continued its 2% growth per year for a century this would lead to a seven fold increase in real national income. The UK has achieved 2½% in the third quarter of this century; a rate like this causes output to double within a generation.

Join now!

As the economy grows and demand increases the government then has another issue to contend with, which is price stability, the target must be distinguished from the stability of each and every price, which is not possible. Changes in prices are important signals of changing costs and demand, the can activate changes in allocation of resources.

The price stability which is the aim of macroeconomic policy is stability in the general level of prices, with its prevention or moderation of inflation. From time to time there are always substantial year to year ups and downs. Over the ...

This is a preview of the whole essay

Here's what a star student thought of this essay

This essay is poorly structured. There needed to be an introduction which summarised the macroeconomic objectives, yet the introduction here just gives irrelevant background information. I would've structured the essay by looking at the macroeconomic objective, and why it is important, and then looked at policies to achieve this. Doing this for each objective would've made for a clear argument. However, this essay doesn't have clear signposts for the paragraphs, so it is hard to follow the line of argument. The syntax is poor in this essay. For example "The price stability which is the aim of macroeconomic policy is stability in the general level of prices, with its prevention or moderation of inflation." doesn't read well at all, and it's hard to award any marks for understanding. Spelling is fine.

The analysis in this essay is sound, but this is the area where most improvements can be made. Having read this essay, I cannot say that it shows a clear awareness of what the macroeconomic objectives are. This is because the essay doesn't have a sharp focus on the question. The discussion of inflation is basic and I would like concepts to be explored rather than asserted. For example "it favours people who are not on a fixed income" is perceptive, yet there is no mechanism explaining why this is the case. When looking at fiscal and monetary policies, it is vital to include an aggregate demand and supply diagram. Especially when looking at macroeconomics objectives, as it's so easy to show the effect on real GDP and the price level. Simple diagrammatical analysis will ensure you get the top marks. There is basic discussion of such policies, but again no focus on the question and this essay fails to draw upon how these policies affect the objectives.

This essay responds averagely to the task, looking at the main macroeconomic objectives. I do feel that this response is a bit jumbled, however. As a result, there isn't enough detail on the policies and how the mechanisms work. I liked how they were looking at whether these objectives were desirable, but this needed to be taken further and explored whether different groups and viewpoints see them as desirable. Such awareness and perception would've been strong analysis.