Economic Objectives

Topics Covered in Unit 3 - Economic objectives and the role of government

3.1 Economic growth

• explain what is meant by economic growth
• calculate and explain how economic growth is measured with reference to Gross Domestic Product (GDP) and GDP per capita
• analyse recent and historical GDP data
• analyse the determinants of economic growth, including investment, changes in technology, size of workforce, education and training, availability of natural resources and government policies
• evaluate the costs and benefits of economic growth, including the impact on economic, social and environmental sustainability

3.2 Low unemployment

• explain what is meant by employment and unemployment
• explain how unemployment is measured using the Claimant Count
• calculate the unemployment rate
• analyse recent and historical unemployment figures
• explain the types of unemployment, including cyclical, frictional, seasonal and structural unemployment
• evaluate the causes and consequences of unemployment for individuals, regions and the government

3.3 Fair distribution of income

• explain what is meant by the distribution of income, including different types of income and the difference between income and wealth
• calculate income and wealth
• evaluate the causes of differences in the distribution of income and wealth and the consequences for an economy

3.4 Price stability

• explain what is meant by price stability and inflation, including the difference between real and nominal values
• explain how inflation is measured using the Consumer Price Index (CPI)
• calculate the effect of inflation on prices
• analyse recent and historical inflation figures
• evaluate the causes of inflation and the consequences for consumers, producers, savers and the government

3.5 Fiscal policy

• explain purposes of government spending and sources of government revenue, including direct taxes and indirect taxes
• explain what is meant by a balanced government budget, budget surplus and budget deficit
• explain what is meant by fiscal policy and how it can be used to achieve economic objectives
• calculate and analyse how taxes and government spending can affect markets as well as the overall economy
• evaluate the costs, including opportunity cost, and the benefits of fiscal policy on the economy to achieve economic objectives
• evaluate economic consequences of measures to redistribute income and wealth, including progressive taxes

3.6 Monetary policy 

• explain what is meant by monetary policy and how it can be used to achieve economic objectives
• analyse how monetary policy can affect growth, employment and price stability
• evaluate the effects of monetary policy on consumer spending, borrowing, saving and investment

3.7 Supply side policies

• explain what is meant by supply side policy and how it can be used to achieve economic objectives
• evaluate the costs, including opportunity cost, and the benefits of supply side policies for the economy

3.8 Limitations of markets

•  explain what is meant by positive and negative externalities
•  explain government policies to correct positive and negative externalities, including taxation and subsidies, state provision, legislation and regulation and information provision
•  evaluate the use and impact of government policies to correct positive and negative externalities
•  evaluate the costs, including opportunity cost, and the benefits of government policies to correct positive and negative externalities