IGCSE Economics: Introduction to macroeconomics What is macroeconomics? ➔ The big picture of economics. ◆ Government policies to inﬂuence the economy. ➔ It is concerned with issues, objectives and policies that affectthe whole economy. ➔ How does the government help or hinder ﬁrms. ➔ How are scarce resources allocated to meet the needs andwants of the whole country and the whole world? ➔ Government believes that macroeconomic stability is theprecondition for capital investment, productivity, companyproﬁts and employment. What are the main objectives? ➔ Sustainable economic growth. ➔ Low inﬂation rate (price stability). ➔ Low unemployment rate. ➔ Healthy Balance of Payments account. ➔ Balanced government budget. ➔ Rising standard of living and a fall in relative poverty throughthe redistribution of income. ➔ Governments will attempt to meet these objectives by imposingeconomic policies. What is the other objective? ➔ Low income disparity: ◆ Measured by the Gini Coefﬁcient which is always givenout of 1 or 100. ◆ A high value here indicates low income disparity:
● Speculation. What do these indicate? ● How well these objectives are met is indicative of an economy’shealth and strength. Differences between governments: ➔ Each government, depending on their political orientation, willhave slightly different goals: ◆ Extremist governments may have radically different goals. ◆ But they will all want: ● High Employment. ● Sustainable economic Growth. ● Balanced Government budget. ● Stable and low Inﬂation by stabilizing prices. ● Higher levels of Trade, capital investment and laborproductivity for balance of payments stability. ● Rising Standard of living and a fall in relative povertythrough the redistribution of income. ● These general goals create the acronym EGGITS. Other Information: ➔ Domestic shocks are internal shocks from within the nation: ◆ The collapse of the Lehman Brothers ﬁrm. ➔ External shocks or exogenous shocks are shocks from withoutthe nation: ◆ Rapid rise in crude oil prices. ➔ Speculation.