Macro Objectives

1. Economic Policy Objectives and
Macroeconomic Performance
EdExcel AS Economics 2.1.1

2. • Macroeconomics studies the behaviour
of an economy as a whole – in
aggregate
National economy
• Macroeconomics studies connections
between developed and developing
countries in the global economy
External factors
• Macroeconomics includes looking at the
effects of policies such as a change in
taxation or higher/lower interest rates
Macro policies
• Macroeconomics involves studying
inflation, growth, progress in human
development, trade and globalisation
Key topics
What is Macroeconomics?

3. What are the key objectives of macroeconomic policy?
Price Stability (CPI
Inflation of 2%)
Growth of Real GDP
(National Output)
Falling Unemployment /
Raising Employment
Higher Average Living
Standards (national
income per capita)
Stable Balance of
Payments on the Current
Account
An Equitable Distribution
of Income and Wealth

4. Additional objectives of macroeconomic policy
Balancing the budget and
reducing the national debt
Improving economic
well-being
Better regional balance
in the UK economy
Improved access to
public services
Improved
competitiveness
Environmental
sustainability

5. Actual and Forecast Economic Indicators for the UK
*Data for 2015 and 2016 are forecasts published for the July 2015 Budget
Economic Indicator 2014 2015* 2016*
Gross domestic product (GDP) % change 3.0 2.4 2.3
GDP levels (2014=100) 100.0 102.4 104.8
Output gap (per cent of potential GDP) -1.0 -0.6 -0.4
Expenditure components of GDP
Household consumption (% change) 2.5 3.0 2.5
General government consumption (% change) 1.6 1.2 0.5
Business investment (% change) 8.0 6.0 7.2
General government investment (% change) 3.4 2.4 -0.1
Net trade:
(exports - imports) (per cent of GDP) -0.6 -0.5 -0.4
Inflation
Consumer price index (annual % change) 1.5 0.1 1.1
The Labour Market
Employment (millions) 30.7 31.2 31.5
Average earnings (annual % change) 2.6 2.2 3.6
Labour Force Survey unemployment (% rate) 6.2 5.4 5.1
Claimant count unemployment (millions) 1.04 0.78 0.73

6. Actual & Forecast Growth for the UK Economy
Source: Office for Budgetary Responsibility, July 2015
Economic growth is measured by the annual rate of change of real national
output (GDP). The actual and forecast rate of growth for the UK is shown in
the chart below. In 2009 the UK economy suffered a deep recession.
Recession: A fall in real
national output lasting
at least 6 months
Forecast: Chart shows a
probability fan chart –
shows low risk of recession

7. Shares of World Economic Output in 2015
16.86%
16.1%
7.11%
4.3%
3.39% 3.07% 2.9%
2.35% 2.34%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
China USA India Japan Germany Russia Brazil United
Kingdom
France
ShareinglobalGDP(percent)
Percentage share of the main industrialized and emerging countries in global gross
domestic product (adjusted for purchasing power) in 2015
Note:
Adjusted for purchasing power means that the US $
value of each country’s GDP has been altered to take
account of differences in the cost of living in
different nations.
Using this measure, China in 2015 is now the biggest
economy in the world although her per capita
national income remains a low fraction of advanced
high-income countries.

8. Economic Policy Objectives and
Macroeconomic Performance
EdExcel AS Economics 2.1.1