Significance Of Achieving Macro-Economic Aim Analysis
The Significance of Achieving Macro-Economic Aims
Governments are aware of the fact that achieving key macro-economic aims would act as an effective driving force in propelling an economy to a new era of welfare. There are 5 macro-economic aims, however, three are considered to be of enormous significance in the early stages of establishing a prosperous period.
The first macro-economic aim which requires imperative attention is ‘Economic Growth’. Economic Growth refers to the rise in the market value of goods and services produced by an economy overtime (n.a, n.d, Investopedia). As indicated by its definition, economic growth is a massive government aim which needs to be satisfied because it plays the pivotal role of …show more content…
Price stability is achieved when inflation does not exceed the two percent limit and, when an economy has not been plunged into a state of deflation (Robert Dransfield, 2010, Economics for Cambridge IGCSE). It is essential to maintain price stability for several reasons. Firstly, social unrest may arise when price stability has not been satisfied and this could have a devastating impact on an economy as people will find it tough to survive daily. For instance, Zimbabwe had suffered from population displacement and a fall in life expectancy when food prices had soared by 231,000,000% during the hyper-inflation crisis in 2008 (n.a, 2008, The Telegraph). Secondly, price stability may breed business confidence as stable prices would encourage businesses to proceed with their current plans and operations without having to fear about any monetary issues. Then, price stability could prevent bankruptcies and unemployment by fending off daunting inflation and deflation rates. This would therefore prevent a possible increment in the investment of unemployment benefits. Finally, export competitiveness could receive a severe blow if prices were to escalate at a quick and high rate. If this were to occur, a nation’s export levels may dwindle abruptly and this would result in the generation of low revenues which would hamper economic growth (Dransfield R., 2010, Economics for Cambridge
Governments are aware of the fact that achieving key macro-economic aims would act as an effective driving force in propelling an economy to a new era of welfare. There are 5 macro-economic aims, however, three are considered to be of enormous significance in the early stages of establishing a prosperous period.
The first macro-economic aim which requires imperative attention is ‘Economic Growth’. Economic Growth refers to the rise in the market value of goods and services produced by an economy overtime (n.a, n.d, Investopedia). As indicated by its definition, economic growth is a massive government aim which needs to be satisfied because it plays the pivotal role of …show more content…
Price stability is achieved when inflation does not exceed the two percent limit and, when an economy has not been plunged into a state of deflation (Robert Dransfield, 2010, Economics for Cambridge IGCSE). It is essential to maintain price stability for several reasons. Firstly, social unrest may arise when price stability has not been satisfied and this could have a devastating impact on an economy as people will find it tough to survive daily. For instance, Zimbabwe had suffered from population displacement and a fall in life expectancy when food prices had soared by 231,000,000% during the hyper-inflation crisis in 2008 (n.a, 2008, The Telegraph). Secondly, price stability may breed business confidence as stable prices would encourage businesses to proceed with their current plans and operations without having to fear about any monetary issues. Then, price stability could prevent bankruptcies and unemployment by fending off daunting inflation and deflation rates. This would therefore prevent a possible increment in the investment of unemployment benefits. Finally, export competitiveness could receive a severe blow if prices were to escalate at a quick and high rate. If this were to occur, a nation’s export levels may dwindle abruptly and this would result in the generation of low revenues which would hamper economic growth (Dransfield R., 2010, Economics for Cambridge