GOVERNMENT ECONOMIC POLICY OBJECTIVES

The Economy What were the last 3 things that you bought? What was the last big thing e.g. a TV that you and your family bought? Who has heard parents or friends delaying buying items at the moment as ‘no one has much money at the moment’

Key Terms Economic Activity – This is the amount of buying and selling that takes place in a period of time. Economic activity is measured by adding up all the value of the sales over a period of time. Economic growth – This is where there is a rise in the rate of economic activity in the economy. Meaning that the value of total sales has gone up. Economic decline - This is where there is a fall in the rate of economic activity in the economy. Meaning that the value of total sales has gone down. This is also called a slowdown or downturn

Key terms The economy – This means all of the people and businesses in the country that engage in buying and selling. This includes you and me. We, our parents and all of the businesses they own are part of the economy. Over time economic activity will change e.g. grow or decline. What reasons can you think of for this?

Key Performance Indicators Economic Growth: in the short run it is an increase in real GDP. In the long run it is an increase in the productive capacity i.e. the maximum output that an economy can produce. Unemployment: the number of people who are out of work but are able and willing to work.

Key Performance Indicators Inflation- This is a sustained rise in the price level. What is deflation? The Balance of Payments: this is a record of a country’s economic transactions with the rest of the world. It is a record of money flows coming in and going out of a country.

Key Performance Indicators Income distribution: Some governments are concerned about how evenly income is distributed. What could they do if they thought that the rich had too much in comparison to the poor? Economic stability: Governments try to promote economic stability as fluctuations create uncertainty and make it difficult to plan ahead. What does this do to; investment, government reform and acquisition of skills for workers?

Discussion What are some Objectives of Government policy? Why do governments want to achieve economic growth? What is sustainable economic growth? What is meant by full employment?

CURRENT TRENDS (UAE??) Find out current results for the economic indicators. GDP growth Unemployment Inflation Is there economic stability?

Balance of payments What is the balance of payments? Activity 26.1 15 minutes. Read ahead done

The Business Cycle

The economy generally grows over a period of time The economy generally grows over a period of time. This means people’s income’s go up, more output is produced by a business etc.

Average growth in economy Level of real output Time

The business cycle pg 319. However it is not quite as simple as that. In some years the economic activity will increase by a lot. In some years the economic activity will decrease by a lot. When the economic activity decreases over a long period of time this is called a recession When the economic activity increases over a long period of time this is called a recovery

Draw this on the centre of a NEW page

Graph: Place these on the graph (Evaluation) Reasons why economic activity might grow. People feel secure in their jobs People’s incomes are rising Therefore people have more money When people have more money they are more likely to go out and buy goods. This means that businesses will receive more money This causes economic growth Reasons why economic activity might decline. People do not feel secure in their jobs and are worried that they might lose them. Income is frozen or not going up. Therefore people do not have as much spare money. If people don’t have a lot of spare money then they will delay buying something or will choose not to go out. This means that the businesses will receive less money People are less willing to borrow as money This causes economic decline/slowdown/downturn

Boom and Bust culture You may heard that the economy is going through a period of BOOM OR BUST. On your graph mark what you think is a boom and what you think is a bust.

Draw the following onto your graph in the appropriate place Reasons why economic activity might grow. Please feel secure in their jobs People’s incomes are rising Therefore people have more money When people have more money they are more likely to go out and buy goods. This means that businesses will receive more money This causes economic growth Reasons why economic activity might decline. People do not feel secure in their jobs and are worried that they might lose them. Income is frozen or not going up. Therefore people do not have as much spare money. If people don’t have a lot of spare money then they will delay buying something or will choose not to go out. This means that the businesses will receive less money People are less willing to borrow as money This causes economic decline/slowdown/downturn

Example comic strip My name is Lennie and I run a used car sales firm. I am the biggest dealer in the area and sell 20 cars per day. I employ 5 other people I need a new car. Look at mine it’s rubbish My name is Arnie and I have a wife and 2 kids.

I’m worried though as my work are getting rid of some of the staff I’m worried though as my work are getting rid of some of the staff. Not sure what will happen to my job….. I’m sorry but we just don’t have enough work. We are going to have to let you go. Boo hoo hoo I’m not sure it I will be able to repay the money if I take out a loan for the car….. I might have to leave it and see what happens Bank

Economic downturn/ slowdown What’s going on. No one is coming to buy my cars anymore I’m going to have to stock less cars as I have no money to buy new ones. My suppliers won’t be happy as they won’t get much money anymore I’m sorry Maude but I am going to have to let you go. People are just not spending money anymore Boo munch, hoo munch, munch Economic downturn/ slowdown

Task Create a comic strip on paper (not in books as we will photocopy the best 2) Your comic strip should shop What causes a economic downturn and its effects on a business What causes a economic upturn and its effects on a business

Unit 3 Economics - Fiscal Policy Types of Taxation (11s) Direct Taxes are taxes on earnings and profits. For example: Income Tax, National Insurance, Corporation Tax, Capital Gains Tax Indirect Taxes are taxes on expenditure. For example: VAT and Specific duties such as excise duties on tobacco & alcohol M Hickling

Taxes In the 1700’s (UK), there was a craze for drinking cheap gin. Lots of alcoholics died as a result. Also heavy gin drinking damaged unborn babies. In 1751 the government put a tax on gin, making it more expensive. Fewer people were able to afford it.

Why else???? Government Expenditure Social Security Law and Order Emergency Services Health Education Defence Foreign Aid Environment Agriculture Industry Transport Regions Culture, Media and Sport

Fiscal Policy is set out in the Budget A budget deficit – means planned spending is greater than government revenue (mainly from taxation) A budget surplus – means planned spending is less than government revenue.

P326 Supply side Monetary Fiscal