1. OBJECTIVES OF GOVERNMENT POLICY
REVIEW 4.1
OBJECTIVES OF GOVERNMENT POLICY

2. 1. PRICE STABILITY (CONTROL OF INFLATION)
2. FULL EMPLOYMENT (NAIRU)
3. ECONOMIC GROWTH
4. BALANCE OF PAYMENTS (EXPORTS & IMPORTS)
1. Government target for price inflations is 2%
2. Non Accelerated Inflation Rate of Unemployment
3. An increase in real terms of GDP
4. Exports= Imports over a course of time

3. Instruments to achieve these policies
1. Fiscal Policy – How a government raises money and spends it.
2. Interest Rate Policy – the base rate is set by the MPC (monetary policy committee) of the BOE.
Base rate is 0.5%
It is the rate at which the BOE will lend to commercial banks
3. Supply side polices

4. REVIEW 4.2
ECONOMIC GROWTH

5. ECONOMIC GROWTH – Growth in output of the economy over time- a growth of real GDP over time.
Gross domestic product – the total value of goods and services produced in the country in a year (GDP)
GDP per capita – GDP divided by the total population, therefore GDP per head.

6. CAUSES OF ECONOMIC GROWTH
Investments – Spending of capital goods (machinery)
Changes in technology
A larger workforce
Education and training
Natural resources
Government policies

7. Production Possibility Curve
Economic growth is the outwards movement of the production possibility curve.