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Economics IGCSEPDF 82
118 pagesrevision 46932
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Notes: The Six Key
Macroeconomic Aims
1. Economic Growth: The goal is a
high andsustainablerateofincrease
in Real GDP(e.g.,2%–3%
annually).
● 2. Full Employment:Thegoalisto
achieve alow unemployment rate
(e.g., around4%–5%),which
represents the natural rate where
the labourmarketisefficiently
functioning.
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3. Price Stability:Thegoalisto
maintainalow and stable inflation
rate (e.g., 1%–3%) as measured by
theConsumer Price Index (CPI).
● 4. Balance of Payments Stability:
Thegoalistoavoid a large or
persistent current account deficit,
which would require the country to
borrow heavily from abroad.
● 5. Redistribution of Income:The
goal is to increase equity by using
taxes and benefits to reduce poverty
and narrow the gap between the
highest and lowest earners.
● 6. Environmental Sustainability:
The goalistoensureeconomic activity
doesnotcauselong-term
environmental damage, for instance,
by reducingpollutionandconserving
resources.
Notes: Conflicts Between
Macroeconomic Aims (Trade-offs)
LowUnemployment vs.Low
Inflation(ThePhillips Curve):
Policies to boost
employment (e.g., spending
more) raise
Conflict:
Aggregate
. If the
economy is close to
maximum capacity, this
drives up prices, leading to
Demand (AD)
demand-pull inflation
Economic Growth vs.Balanceof
Payments Stability:
○ Conflict:
When incomes rise
rapidly due to economic
growth, consumers buy more
goods, including a higher
volume of imports. This
causes the value of imports
to rise faster than exports,
potentially creating or
worsening a trade
deficit
Economic Growth vs.
Environmental Sustainability:
Increased output
and consumption require
more energy and raw
materials, leading to higher
levels of pollution, waste
generation, and resource
depletion, which clashes with
the goal of long-term
sustainability.
Conflict:
Unsolved Past Paper Questions
Question 2.1 (4 Marks)
Explain what is meant by price stability
and how it is measured.
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