Government objectives — AQA GCSE Economics
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Government objectives explained
Governments pursue four principal economic objectives: stable prices (low inflation), economic growth (rising GDP), full employment (low unemployment), and a balanced Balance of Payments (exports matching imports).
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Each objective is measured using specific indicators, such as the Consumer Prices Index for inflation. Students must understand the causes behind changes in these indicators and evaluate their positive and negative implications for the economy. Crucially, policies to achieve one goal often conflict with others. For example, using expansionary fiscal policy to boost economic growth and achieve full employment might increase consumer spending, which can cause demand-pull inflation and worsen the Balance of Payments as imports rise.
Your focus
- Define and measure the four principal macroeconomic objectives of the government.
- Explain the causes and the positive and negative implications of changes in these economic objectives.
- Analyse how policies designed to achieve one economic objective can positively or negatively impact other objectives.
Government objectives exam tips
Marking Points
- Identify the four main government economic objectives: stable prices, economic growth, full employment, and Balance of Payments.
- Explain how each objective is measured, such as using Gross Domestic Product for economic growth or the Consumer Prices Index for inflation.
- Analyse the causes and the positive and negative implications of changes in these objectives for economic agents.
- Evaluate the trade-offs and conflicts between policy objectives, such as the conflict between achieving economic growth and maintaining stable prices.
Examiner Tips
- 💡When evaluating a government policy, always consider its impact on at least two different macroeconomic objectives to demonstrate an understanding of policy trade-offs.
- 💡Use specific measures, such as the Consumer Prices Index or Gross Domestic Product, rather than vague terms like prices or output.
- 💡In multiple-choice questions on macroeconomic objectives, identify which indicator measures each objective and watch for classic policy trade-offs, such as economic growth causing inflation.
Common Mistakes
- Confusing the government budget deficit with the Balance of Payments deficit; the former relates to government spending and taxation, while the latter relates to international trade flows.
- Assuming that stable prices means prices do not change at all; it actually means a low and steady rate of inflation, typically targeted at 2% in the UK.
- Treating full employment as 0% unemployment; there will always be some frictional and structural unemployment in a dynamic economy.