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GCSE: Economy & Economics
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What are the government's economic objectives?
- 1 The government has four main objectives for the economy. These are called macroeconomic objectives. The relative importance of each varies from time to time and they are all interlinked.
- 2 Economic growth as measured by an increase in Gross Domestic Product (GDP) which the total value of everything produced in a country. This means that income will be increasing across the country.
- 3 Low unemployment means that fewer people are actively seeking employment. It is likely to come at the same time as rising growth. There will always be some unemployment as there will be people between jobs but the government usually likes to minimise it as it is expensive, unpopular and a waste of human resources for the economy.
- 4 Low inflation means that prices are only rising slowly. High prices means that goods of the country become less competitive compared to foreign countries and so will lead in the long run to lower growth and more unemployment. Inflation usually increases as growth increases so to achieve both is a difficult balancing act for a government.
- 5 Balance of payments equilibrium means that the value of goods and services imported equals the value of goods and services exported. This has become less important as an objective in recent years. Higher growth usually means more imports so the balance of payments also worsens as the economy grows.
What are the government's policies to achieve these objectives?
- 1 The government has several weapons it can use to adjust the economy to achieve the best balance of the economic objectives. Some of these are used at any time and some announced in the annual budget.
- 2 Interest rates can be increased or reduced to affect the amount of money in the economy. If interest rates are high, it becomes more expensive to borrow money so there will not be as much spent. This is mainly used to reduce inflation. Strictly speaking this is not a government action as the Bank of England decides on the best interest rate in the UK.
- 3 If interest rates are reduced, it will increase the amount of money in the economy as it becomes cheaper to borrow and there is less inclination to save money. There should therefore be more investment and spending which should lead to more growth.
- 4 The government can change the amount that it taxes and spends. By reducing tax, spending more and borrowing the difference it can increase spending in the economy so stimulating growth. It can increase tax or reduce spending to reduce inflation.
- 5 Recently, the Bank of England has tried quantitative easing to increase growth in the economy. This involves increasing the amount of money in circulation, again stimulating spending.
What are the long term policies for growth?
- 1 In the long run, the government would like to increase growth without having to use the above measures too much. This involves the use of supply side policies which aim to increase the amount that the economy can produce without setting off inflation.
- 2 Policies to increase productivity include privatisation (selling off government owned business so that it can be run competitively), deregulation (making it easier for businesses to compete in certain markets) and stronger competition laws. The aim is that increased competition will force businesses to become more efficient.
- 3 Encouraging investment and new businesses should increase growth. The government can give tax breaks for research and development, reduce corporation tax and give encouragement to new businesses.
- 4 Making the labour market more competitive should also improve the economy. Measures taken here include reducing the power of trade unions. Improved education and training should also make the workforce more productive.
- 5 Tax and spending is used as an incentive for people to work by for instance reducing rates of income tax and reducing welfare payments so people are more inclined to work.
This is done through its own activities and through working with the national central banks. Together, the ECB and the euro area national central banks are known as the Eurosystem. European Central Bank website (www.ecb.int) The national central banks (NCBs) of the European Union, along with the European Central Bank (ECB), make up the European System of Central Banks (ESCB). The NCBs of Member States not participating in the euro area, i.e. Denmark, Sweden and the United Kingdom, have a special status which allows them to conduct their own national monetary policies, but not to take part in deciding and implementing monetary policy for the euro area.
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Similarly, economists often refer to the approach Russia adopted in implementing her reform policies as the "shock therapy" (or "big bang approach"), applying a nationalwide privatization and prize liberation, that is, starting fast and attempting to remove all the problems at once7. On the other hand China has preferred to implement the so-called "incremental reform strategy" (or "gradualism"8), introducing the market forces progressively, that is, eliminating the easy problems soon and leaving the hard ones for the future9. This work will therefore concentrate on the comparison of the different approaches to economic reform adopted by China and Russia, as a result of the dissimilar ideologies behind the reform itself (the "incremental reform strategy" and the "shock therapy" respectively)
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Australia has had one of the strongest economies in the world in recent years, more competitive, open and vibrant than ever.
These factors are known as economic objectives. They are: * Economic Growth * Full Employment * Price Stability * External Balance The final measure of economic success is that of a country's "Standard of living". It is argued, however, that this objective takes into account aspects of all the other objectives, and should therefore be set aside from them. The "Standard of living" objective is undoubtedly the most significant in determining whether or not an economy is successful. (Alcorn, 2003)
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Although the systems ended up in ruins, the command economic system did deliver some success. In 1950 the USSR's GNP was 40% of the G7 average. By 1970 that figure had risen to 70% indicating that in the intervening 20 years growth had been much faster in the east than the west. However this picture changed in the middle 1970's. The Eastern Bloc could no longer compete effectively in the arms and space races, it was poorer than the west and only its rapid growth had enabled it to compete.
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How have some of the recent changes to this years budget 2002 affected various businesses in a town such as Wokingham?
Below are 9 questions which I have created from reading the changes to the budget. Each question is from a different section of the budget which has been changed and I intend to implement them into a questionnaire to give out to some people owning businesses within the town of Wokingham. When the questionnaires are collected back in again, I intend to analyse them and see what everybody's opinion of these changes to the budget are. Map and Location On the next page is what the questionnaire looked like blank with no answers filled into it.
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Should the control of money supply be an essential part of macro-economic policy? Discuss two problems that havbe been encountered in the operation of monetary policy.
Cash is then high powered money within the system. The money multiplier is 1divded by 0.01 or 100. So if the banks held �1 billion in cash, they would create a maximum of �100 billion in deposits. The money supply would then consist of any cash in circulation with the public plus �100 billion of bank deposit money. One possible way in which a central bank can influence the size of the money supply is if it alters the size of the reserve ratio.
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For example, the policy of autarky was a push for self-sufficiency within Germany. Germany no longer wanted to rely on loans and trade from other countries, as such reliance on other powers could lead to problems with their later war orientated foreign policy. Deficit spending increased government investment in projects such as the "Works Creation Scheme" or Arbeitdienst. Projects such as the autobahns would help the infrastructure of Germany and aid military mobility later. They also increased disposable income for consumers by using deficit spending to create jobs. The "Battle for Work," as this became known, meant that if you were between 19-25 years of age, it was compulsory to be involved in one of these schemes.
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It is doubtless that Germany owes a great debt and has much to thank for the foreign aid it received, mainly within the framework of America's Marshall Plan. Germany must also be extremely grateful for the benefits it derived after the war from the long-term military occupation by the Allied Forces. This allowed Germany to concentrate and focus its priorities on economic development instead of spending its very limited resources on expensive defense ventures. However, looking at the objectives of the Marshall Plan and the reasons for the presence of a strong Allied military force in Germany, we must ask
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Currently British Airways is the world's biggest international airline as measured by the number of routes and destinations under its control. It carries more passengers from one country to another than any of its competitors. Recent developments have seen it enter into alliances and agreements with other airlines, where costs and revenues have been shared in order to increase network coverage. How has British Airways been affected by the UK and Global economy in the last ten years? Increased Competition Over the last two-and-a-half years, British Airways has made significant changes in its business strategy.
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How have interest rates changed over the last thirty years? What affects have these had on the economy and why?
The interest rate is the cost of saving and the cost of borrowing. I.e. when you take out a loan, it is the amount of money you have to pay back on top of your loan. If you save your money in a bank it is the amount of money that you gain during a certain time period. From this basic principal the government can control the money in the market; this is why it is called the monetary policy.
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* 1948-53 the economic system imitated across Eastern Europe after World War 2. * The eastern states of Europe became part of the soviet trading block Comecon. (Council for mutual economic assistance. These economies successful active for decades, this being a good advantage from quick development of industry until a slow down in economic growth, in 1970 & 80s so this meant taxes would have risen slightly at this stage, and a decrease in expenditure. Also these led to and increase in production costs and there was less existence in land, raw materials, and energy.
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This was a major oversight which only became apparent once Comecon fell apart because many of the countries who were allocated certain industries, never had the raw materials to manufacture the raw materials from elsewhere and as a result had to suffer once the Comecon collapsed and no outlet for there "goods" could be found. Another reason for the creation of Comecon and also an indication of why its demise is in fact good for the countries is that from the outset, although not plain, the Soviet Unions interest was clearly to devise an economic structure similar to that of the Marshall plan in order to encourage its fellow communist allies to not change their political ideologies.
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The spurt in the range and availability of consumer goods that followed seemed to justify this measure. But the masses whose incomes were being squeezed by limited employment opportunities and inflation were unimpressed by the new cars and refrigerators that were now available for purchase. And the increasing trade deficit also had it's detractors. Responding to this pressure in 1996, sections of the UF campaigned vigorously against the negative effects of such unbridled external liberalization. But contrary to the UF's pre-election pledges, the UF Finance Minister, Mr Chidambaram showed no compunctions in accelerating the process of external liberalization by drastically lowering import barriers.
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resources currently present in the economy * X is a point inside the curve and it shows a sate in which there is inefficiency in the economy since it is not operating at its maximum production potential (on the curve) * Y is a point outside the curve and it shows a point currently unachievable (with the current state of resources in the economy) * The PPC can be shifted outwards when economic growth takes place, due to technological advancements or an increase in the quality or quantity of resources in the economy * Once it has shifted outwards, the point Y becomes achievable (and thus the total output of the economy increases, the reason for economic growth)
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