Which one of the following best describes a macroeconomic objective pursued by a government that wants stable prices, high employment and sustained growth? ...

Assessment: Economics 9214 | Paper 1 Mock 01 | Written Paper 1 Subject: Economics - 9214

Question 1 Report

Which one of the following best describes a macroeconomic objective pursued by a government that wants stable prices, high employment and sustained growth?

(a) Which objective is concerned directly with a continuing increase in real GDP? [1]
(b) Explain why a government may wish to keep inflation low and stable. [2]

Answer Details

(a) The objective concerned directly with a continuing increase in real GDP is economic growth. [1 mark]

(b) Low, stable inflation makes future prices more predictable. This helps consumers plan spending and helps firms plan costs, prices and investment. It also protects the purchasing power of incomes and savings: when prices rise slowly, a given amount of money loses value less quickly. [2 marks]

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