A look at the main macroeconomic objectives (economic growth, inflation and unemployment, government borrowing) and possible conflicts between these different macro-economic objectives. The main macro-economic objectives Economic growth – positive and sustainable growth (The UK, long-run trend rate is around 2.5%) Low inflation (UK target 2% +/-1) – Low unemployment / Full employment (e.g. around …
Definition of efficiency Efficiency is concerned with the optimal production and distribution of scarce resources. Different types of efficiency Productive – producing for the lowest cost. Allocative – distributing resources according to consumer preference P=MC Dynamic – Efficiency over time. X-efficiency – incentives to cut costs. Efficiency of scale – taking advantage of economies of …
Readers question: Are subsidies more effective than minimum prices when supporting farmers? Subsidies involve governments giving money direct to farmers. A minimum price is when the government ensures a legal price that prices cannot fall below that level. Minimum prices will increase incomes for farmers. Farming can see volatile prices because supply can vary and …
A current account deficit means the value of imports of goods/services / investment incomes is greater than the value of exports. It is sometimes referred to as a trade deficit. Though a trade deficit (goods) is only part of the current account. If there is a current account deficit, it means there is a surplus …
Readers Question: Does job creation come from public or private sector? The public sector is government (national and local). Public sector jobs include doctors, police, teachers and civil servants. The private sector is private enterprises – retail, manufacturing, local services. Public sector jobs as a share of total employment UK 23.5% (2013) US 14.6% (2008) …
Global economic imbalances refer to an unfair distribution of resources between different countries or it may refer to a one-sided trade situation. Global economic imbalances include Balance of Payments. Unbalanced trade between different economies, e.g. US trade deficit with China Unemployment levels, e.g. high unemployment in southern Europe versus low unemployment in US, UK. Poverty …
Does economic growth conflict with the objective of the balance of payments stability? UK economic growth and current account balance Both economic growth and balance of payments are macroeconomic objectives. Economic growth is an increase in real GDP – leading to higher living standards. Balance of payments stability refers to a sustainable or limited current …
What factors enable a firm to grow in size? Internal expansion When a firm increases size through increasing production and sales. External expansion – When the firm grows through a merger with another firm. Internal expansion can involve Cutting price to increase sales and gain more market share. This may make the firm less profitable …