9708. A2. Macroeconomic Policy Objectives

Introductory Task

INFLATION – Governments aim for price stability, i.e. low and stable inflation. They often set the central banks an inflation target.

BALANCE OF PAYMENTS – Most governments aim for the balance on the current account of the balance of payments to get close to zero over time, however in the short run, governments may be happy about a current account deficit due to importing raw materials and capital goods, or may prefer a current account surplus to boost aggregate demand or provide funds to repay external debt. A surplus on the financial account may also be welcomed, as attracting foreign direct investment (“FDI”), allowing for an increase in output and employment.

Task – Philippines Macroeconomy

EXCHANGE RATE – Most governments with a floating exchange rate seek to prevent wide fluctuations in its value, which can be destabilising. A government may seek to raise the external value of their currency, in order to reduce inflationary pressure, or may seek to reduce its value in order to gain a competitive advantage. A lower exchange rate can increase output and create jobs.

UNEMPLOYMENT – Governments seek to minimise unemployment, particularly long-term unemployment, which can lead to workers dropping out of the labour force. An economy with near to full employment will have higher output and the higher living standards will be, whereas workers dropping out of the labour force would decrease both actual and potential output.

Task – Female Work Force

Beyond Economic Growth
As well as aiming for sustainable economic growth, governments aim for economic development, for instance, increasing life expectancy and educational opportunities.

A 1991 World Development Report by the World Bank defined the task of development as “to improve quality of life. Especially in the world’s poor countries, a better quality of life generally calls for higher income – but it involves much more. It encompasses as ends in themselves better education, higher standards of health and nutrition, less poverty, a cleaner environment, more equality of opportunity, greater individual freedom and a rich cultural life.”

Also, rapid economic growth can lead to increased inflation by increasing aggregate demand and short term economic growth could come at the cost of long term growth, eg if chemical fertilisers are heavily used on the land, this may lead to a rise in agricultural output but least to the land being damaged and less able to produce crops in the future. We can define sustainable development as development that ensures that the needs of the present generation can be met without harming the well-being of future generations.

TaskMacroeconomic policies

Task – Impact of Tourism

International tourism has increased significantly in recent years and, after a downturn in 2020, is likely to continue to grow. Tourism creates jobs and incomes, but it also creates environmental damage.

Tourism contributes over 60% of the GDP of the Maldives. However, it is also responsible for 80% of emissions of greenhouse gases in the country. Waste and litter created by tourists is also significant, although the country has made progress in recent years in recycling.

  1. How does tourism affect the quality of life in your country?
  2. How may the environmental damage caused by tourism be reduced in the future?

Task – UN sustainable goals

Research and identify what the UN Sustainable Goals are. In small groups, pick 5 of these goals and prepare a presentation for the rest of the group on whether you think Georgia has achieved or will achieve these goals.

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