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Macroeconomic objectives
The UK government has 4 main macroeconomic objectives. They are
low unemployment, high inflation, surplus on the current account of the
balance of payments and sustainable economic growth.
Low unemployment is important because if more people are out of work
the government have pay jobseekers allowance to them and those
people are spending less. The number of people out of work but seeking
a job is calculated by the number of people incapacity benefit.
In the UK the target for inflation is 5%. The Monetary Policy Committee
set this allowing a + or – 1% window. Inflation measures the general rise
in average prices. The Consumer Price Index (CPI) measures a basket of
approximately 650 goods and the annual change in them.
The current account of the balance of payments measures exports
minus imports. If the amount of exports is greater than the amount of
imports then there is said to be a deficit. The UK has had a deficit in the
current account for quite some time. A deficit is not a great problem as it
is good to have a large amount of imports into a country if the imports
improve living standards.
Sustainable economic growth is the fourth objective of the government.
Economic Growth is measured by the annual percentage change in real
GDP. Real means taking into account interest rates. Economic Growth is
the increasing in the productive potential of the economy.