SECTION 1MANAGING THE

ECONOMY

SECTION 1MANAGING THE

ECONOMY

You have the answer, what was the question?

1. Economic Growth, Low Inflation, Low unemployment and a Balance of Payments

2. Gross Domestic Product

3. Per quarter (i.e. every three months)

4. A general rise in the price level

5. The value of all UK imports is equal to the value of all UK exports

SECTION 1MANAGING THE

ECONOMY

Managing the economy

GCSE ECONOMICS: UNIT 12

1.1 Government Objectives

SECTION 1MANAGING THE

ECONOMYAims of today’s lesson …

• Identify the key economic objectives set by governments

• Analyse UK economic performance against the economic targets set by the government

• Evaluate the economic success of the UK government in the last 10 years

SECTION 1MANAGING THE

ECONOMY

Government Economic Objectives: Economic Growth

• Economic growth looks at how fast national income grows over a period of time

• This is normally measured using GDP over one year, although the data in the UK is also calculated on a quarterly basis

• Governments want economic growth to be high and sustainable, targeting 2 to 3% per year, because high growth adds to national income, which leads to higher incomes and better standards of living

• However if economic growth is too high and unsustainable it can difficult to achieve other government objectives such as stable prices

• For example, a feature of high growth is high consumer spending and this often causes rising prices

SECTION 1MANAGING THE

ECONOMYAssessment Objectives

1. Recall, select and communicate their knowledge and understanding of concepts, issues and terminology

2. Apply skills, knowledge and understanding in a variety of contexts

3. Analyse and evaluate evidence, make reasoned judgements and present appropriate conclusions

SECTION 1MANAGING THE

ECONOMY

Government Economic Objectives: Stable Prices

• The government would prefer that prices are generally stable (i.e. that prices neither rise nor fall)

• This does not mean that no prices change at all, but that the average price level is stable

• A period when prices are continually rising is known as inflation

• The coalition government in the UK targets an inflation rate of 2% per annum using CPI, which the Bank of England attempts to maintain within a +/-1%

SECTION 1MANAGING THE

ECONOMY

Government Economic Objectives: Full Employment

• Unemployment refers to those of working age who are currently not working and not in full time education

• Governments want to achieve full employment (this is not the same as zero unemployment)

• Full employment is achieved when those actively seeking work can find employment

• Whilst there is usually no explicit target for unemployment, the preference for low unemployment, usually 4 to 5% or less, is desirable

• As with targeting economic growth conflicts can arise when pursuing full employment

• A low level of unemployment for example, means workers have income to spend, which can lead to unstable prices

SECTION 1MANAGING THE

ECONOMY

Government Economic Objectives: Balance of

payments

• The balance of payments (BOP) refers to financial transactions between the UK and all other foreign countries over a period of time

• The government would prefer to see the BOP at a level where exports is equal to imports

• If the value of imports was greater than the value of exports then more money would be leaving the country than flowing in, meaning savings are spent and more money needs to be borrowed by the government to finance these imports

• Ideally there should be a small surplus on the BOP account

SECTION 1MANAGING THE

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Ethical issues & government objectives

Q. What are ethics?

A. Ethics are an informal code of how we should behave – decisions we all make about what is morally right or wrong

• The UK government believes that it is ethically right to minimise poverty and income inequalities

• This is done through the tax and welfare benefits system – leading to a fairer outcome

• However poverty still exists within the modern economies including the UK

SECTION 1MANAGING THE

ECONOMY

Ethical issues & government objectives

• Having equal incomes may sound idealistic however this situation would de-motivate people to work hard, long hours - Imagine if after all his hard work Sir Alan Sugar was paid the same as everyone else

• This begs the question – how wide should the gap between the richest and poorest members of society be?

• Watch the following video on income inequality – it raises a number of important issues concerning the consequences of income inequalities

SECTION 1MANAGING THE

ECONOMYPlenary: Interactive Questions

• You will be asked 5 key questions from Today’s lesson

• Read each question carefully

• Choose the correct answer and then click on ‘Submit’

• Be prepared to discuss your answers

SECTION 1MANAGING THE

ECONOMYAims of today’s lesson …

• Identify the key economic objectives set by governments

• Analyse UK economic performance against the economic targets set by the government

• Evaluate the economic success of the UK government in the last 10 years