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SECTION 1
MANAGING THE
ECONOMY
SECTION 1
MANAGING 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 1
MANAGING THE
ECONOMY
GCSE ECONOMICS: UNIT 12
Managing the economy
1.1 Government Objectives
SECTION 1
MANAGING THE
ECONOMY
Aims 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 1
MANAGING 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 1
MANAGING THE
ECONOMY
Assessment 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 1
MANAGING 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 1
MANAGING 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 1
MANAGING 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 1
MANAGING THE
ECONOMY
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 1
MANAGING 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 1
MANAGING THE
ECONOMY
Plenary: 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 1
MANAGING THE
ECONOMY
Aims 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