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

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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. Yet the economic system is unable to fully match up this desire for work with the desire for goods and services.

        The social problem lies in the poverty that unemployment brings with it, and this involves not merely a deprivation of material goods and services. It also involves the feelings of degradation and rejection that the unemployed feel, living in a society where a job give status and satisfaction whilst unemployment is considered a failure of the individual. Therefore, poverty both material and psychological is the fate of those whom are unemployed.

        The problem of high unemployment can be eradicated or reduced with the aid of various measures and policies. The first way of reducing unemployment levels is with the implementation of expansionary policies where the cause of the high unemployment is the lack of demand.

Expansionary policies may be used by governments, which wish to reduce unemployment and achieve a higher rate of economic growth. For example, Fiscal policies, e.g. tax cuts and increases in expenditure, and a Monetary policy of reduced interest rates will all tend to increase aggregate demand. (The total demand for all goods and services from all sources in the economy) These policies will encourage firms to expand output and consequently take on more labour.

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However, care must be taken not to overdo expansionary policies, lest growth leads to pressure on resources and accelerating inflation, which would only worsen the problem and severity of unemployment.

The government could also reduce unemployment levels by the reduction of immobilities, especially where structural unemployment is present in which changes in the pattern of demand for certain goods and services has resulted in certain industries becoming less active, shipbuilding being a primary example.

Immobilities can be reduced by several methods. For example, geographical immobility in which people are unable to take up a job which is available because they ...

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