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The Government & The Economy. Learning Objectives To understand the Economic Objectives of...
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The Government&
The Economy
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Learning Objectives
• To understand the Economic Objectives of Governments
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Government Economic Objectives
• Low INFLATION
• Low levels of UNEMPLOYMENT
• Economic Growth
• BALANCE OF PAYMENTS – avoiding deficits between exports & imports
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INFLATION• Inflation occurs when PRICES RISE• If prices rise rapidly then:Wages will not buy as many goods
REAL INCOME fallsHigher prices than other countries less
competitive and people will buy from abroad Job losses
Businesses may shrink and living standards fall
THERFORE GOVERNMENT AIM =
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UNEMPLOYMENT
• Occurs when people are not working
• If unemployment is HIGH then:Level of output will be low people not
producing goodsGovernment pays unemployment
BENEFIT to help costs government money public services may suffer
THEREFORE GOVERNMENT AIM =
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ECONOMIC GROWTH
• An economy grows when level of output in a country increases.
• GROSS DOMESTIC PRODUCT (GDP) measures the value of goods and services produced in country in one year.
• Growth = GDP & standard of living
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IF GDP FALLS…….• There is no economic growth causing:Less output of products less workers
needed unemployment increasesPeople can not afford to buy as many
goods or services poor standard of living
Businesses shrink (more unemployment) as people don’t buy products.
THEREFORE GOVERNMENT AIM =
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ECONOMIC GROWTH & TRADE CYCLE DIAGRAM
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GROWTH
• GDP is rising
• Unemployment is falling
• Living standards are high.
• Businesses are doing well.
• The economy of the country is good
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BOOM
• Caused by too much spending
• Prices rise quickly
• Shortage of skilled workers
• Business costs rising
• Businesses are uncertain about the future will not expand or employ more workers
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RECESSION
• When GDP actually falls (goes down)
• Often caused by a lack of spending
• People don’t buy products
• Businesses have falling demand and profits
• Businesses reduce costs make workers unemployed
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SLUMP
• Serious and drawn out recession
• Unemployment reaches high levels 10%+
• Businesses will lose sales
• Prices may fall to try to sell products
• Many businesses will not survive
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Write down the terms which are MOST appropriate for the scenario
TERMSUNEMPLOYMENT – LOW OR HIGHINFLATION – LOW OR HIGHGROSS DOMESTIC PRODUCT - orLIVING STANDARDS – GOOD OR BAD
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SCENARIO 1• THE PRICES OF BREAD, MILK, CLOTHES AND
OTHER NECESSARY ITEMS HAS INCREASED
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SCENARIO 2• UNEMPLOYMENT IN THE COUNTRY IS AT A RECORD LOW
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SCENARIO 3OUTPUT OF GOODS AND SERVICES FALLS IN THE COUNTRY
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SCENARIO 4
ECONOMIC GROWTH INCREASES IN THE COUNTRY
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State the term MOST appropriate for the scenario
• GROWTH
• BOOM
• RECESSION
• SLUMP
THEN…..
WRITE ON SHEETS WHAT OTHER EFFECTS THIS MAY CAUSE.
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SCENARIO 1• PRICES OF GOODS HAVE GONE UP AND PEOPLE
ARE NOT SPENDING MONEY
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SCENARIO 2• THE NUMBER OF GOODS BEING PRODUCED AND
SOLD IS GOING UP
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SCENARIO 3• BUSINESSES ARE LOSING MONEY AND ARE NOT
SURVIVING
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SCENARIO 4• PEOPLE ARE SPENDING TOO MUCH CAUSING
PRICES TO RISE QUICKLY
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PLENARY• From this lesson I have learnt that the desired economic
objectives of the government are: