Key Economic Objectives of Governments Governments have several important economic objectives they aim to achieve through fiscal and monetary policies. The main...
Governments have several important economic objectives they aim to achieve through fiscal and monetary policies. The main economic objectives are:
Economic growth refers to the increase in a nation's capacity to produce goods and services over time. It is measured by the annual percentage change in real Gross Domestic Product (GDP). Sustained economic growth leads to higher living standards and improved welfare.
Governments strive to maintain low levels of unemployment by creating conditions for businesses to expand and hire more workers. High unemployment not only causes financial hardship for individuals but also leads to lower tax revenues and higher welfare spending.
Problem: If a country's labor force is 20 million and 18.5 million are employed, calculate the unemployment rate.
Solution:
Governments aim for an equitable distribution of income and wealth to reduce poverty and income inequality. This is often achieved through progressive taxation and welfare programs.
Price stability refers to low and stable inflation rates. High inflation erodes purchasing power and can lead to economic instability. Central banks use monetary policy tools like interest rates to control inflation and maintain price stability.
By pursuing these key economic objectives, governments aim to promote overall economic well-being and improve the standard of living for their citizens.