Objectives of Government Policy 

Throughout this worksheet you will be asked to answer a number of questions; you will find the answers on various websites.  Go to www.revisionguru.co.uk select “Economics”, “Edexcel”, “Unit 3” and then “Objectives of Government Macroeconomic Policy - Worksheet”.  Right click on any links and select “Open in a new window” to view the web page.

What is Macroeconomics?

Macroeconomics is concerned with issues, objectives and policies that affect the whole economy.  Aggregate means the sum of all individuals, therefore all economic analysis that refers to aggregates is macro. The UK unemployment rate, the UK inflation rate, the rate of economic growth in the UK; these are all UK aggregates and therefore macro issues.

What Are The Major Objectives Of Macroeconomic Policy?

Go to http://www.revisionguru.co.uk/economics/govpolicy.htm and answer the following questions:

What are the four traditional major macroeconomic objectives?

 Over the next few months we will look at:

• how these objectives are measured;
• the relative importance of these objectives;
• how successful recent governments have been in achieving these goals; and
• the difficulties that governments have in trying to achieve all the objectives at once.

What are the Government’s present economic policy objectives?

Have a look at a letter written by the Chancellor of the Exchequer, Gordon Brown, to the Governor of the Bank of England, and answer the following questions.  This letter contains information about the Government’s economic policy objectives. 

The original letter can be found by clicking here.

 Who is the present Governor of the Bank of England?

Mervyn King who is the present Deputy Governor of the Bank of England will take over as Governor at the end of June.

How often must the Chancellor of the Exchequer specify what price stability (stable inflation) is taken to consist of and the Government’s economic policy objectives to the Governor of the Bank of England?

What is the inflation target (RPIX will be covered in the coming weeks) for the coming year?

In addition to price stability, what are the two other macroeconomic objectives of the Government?

What is the name of the committee that decide upon the rate of interest?

What are the objectives of the Bank of England?

What range is the rate of inflation allowed to fall within?

If the rate of inflation falls outside of this range, the Governor of the Bank of England must write an open letter to the Chancellor of the Exchequer.  What information must be contained in this letter?

When is the inflation target confirmed?

Which Objective was the most important

Return to http://www.revisionguru.co.uk/economics/govpolicy.htm to answer the following questions.

Which objective was considered to be the most important after the 2^nd World War?  How long did this objective continue to be at the front of politicians' minds for?

Which objective was considered to be very important in the 1960s?  Is it seen as an important objective today?  Why?

Why are growth and inflation important objectives?

How Successful Have Recent Governments Been In Achieving These Goals?

What are strong periods of growth called?

What are periods of negative growth called?

All governments have a goal of eliminating wildly changing economic cycles, i.e. they want continual, reasonable growth that never ignites inflation.  What level of growth would allow this to occur?

At what level did inflation peak at during the 1970s?

Has inflation been stable over the past eight years?

When the economy has achieved “full employment” does everybody have a job?

Use any websites you wish to find out the latest figures on following economic statistics.

Rate of interest

Inflation (state which measure, e.g., RPI, RPIX)

Growth (usually measured in % change in GDP)

Unemployment (figure and %)

Volume of exports

Volume of imports