Government and the macroeconomy

Topics

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Sample objectives

What this unit covers

• The role of government: Understand the functions of government at local, national, and international levels.
• The macroeconomic aims of government: Understand the main macroeconomic goals of governments, which include promoting economic growth, achieving full employment or low unemployment, maintaining stable prices or low inflation, ensuring balance of payments stability, and redistributing income. Discuss the reasons for selecting these goals and the criteria that governments use to evaluate each one.
• The macroeconomic aims of government: Explore the potential conflicts that can arise between different macroeconomic objectives, such as the trade-off between achieving full employment and maintaining stable prices, the tension between economic growth and balance of payments stability, and the conflict between full employment and balance of payments stability.
• Fiscal policy: Understand the concept of the government budget.
• Fiscal policy: Identify the reasons behind government spending, including key areas and their effects.
• Monetary policy: Explain what money supply and monetary policy mean.
• Monetary policy: Identify the tools of monetary policy, including adjustments to interest rates, money supply, and foreign exchange rates.
• Supply-side policy: Explain what is meant by supply-side policy.
• Supply-side policy: Identify various measures that can be classified as supply-side policies, such as education and training, reforms in the labor market, reductions in direct taxes, deregulation, enhancements to work and investment incentives, and privatization.
• Economic growth: Explain what economic growth means.
• Economic growth: Discuss how economic growth is measured, focusing on Real Gross Domestic Product (GDP) and GDP per capita.
• Employment and unemployment: Understand the definitions of employment, unemployment, and full employment.
• Employment and unemployment: Examine the evolving trends and levels of employment, including factors like the growth of the tertiary sector, increased female participation in the workforce, and shifts from public to market employment.
• Inflation and deflation: Explain what inflation and deflation are.
• Inflation and deflation: Discuss how inflation and deflation are measured, particularly using the Consumer Prices Index (CPI).