Government Impact on Business: Economic Objectives | Business Studies for GCSE/IGCSE - Year 11 PDF Download

Government Economic Objectives

• Most governments pursue similar objectives for their national economies

Diagram: Government Economic Objectives 

Positive economic growth 

• Positive economic growth denotes the augmentation in the quantity of goods and services generated per capita within a specific timeframe.
• Enhanced GDP growth typically correlates with an elevation in the populace's standard of living.
  • With an upsurge in output, heightened employment levels are attained due to increased demand for labor.
  • As households witness an improvement in their financial status, they can afford a greater array of goods and services.
  • Business proprietors expand their enterprises as consumer purchasing power rises, leading to an upswing in revenue.

Low levels of inflation

• Inflation signifies a broad upsurge in prices and a decline in the purchasing power of currency over time.
• The governments of both the UK and the US establish a 2% inflation target for their respective Central Banks.
• Central Banks employ various tools, including base rates and quantitative easing, to attain this target.

Low levels of unemployment

• Unemployment pertains to individuals without employment who are actively searching for work and are available for employment opportunities.
• Low unemployment rates enhance national output, elevate workers' living standards, and diminish government expenditure on welfare benefits.

A healthy balance of payments

• The balance of payments signifies the correlation between the worth of imports and exports throughout a specified duration.
• Exports contribute foreign currency into an economy, whereas imports entail the outflow of currency.
  • In the event of a balance of payments deficit:
    • The country may deplete its foreign currency reserves, necessitating costly borrowing from overseas.
    • The exchange rate, which denotes the value of one country's currency against another, is liable to decline.