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]
(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]
Everything you need to excel in your exams