One of the main objectives of a government is to achieve high rates of economic growth, which is the increase in the market value of the goods and services produced by an economy over time, (Statista, 2015) and avoid recessions, which translates to long term growth, rather than a temporary phenomenon. In order to accomplish this, it is crucial for a stable growth to be maintained, which therefore does not encourage short-term economic growth that cannot be sustained. As far as unemployment is concerned, its reduction is another major macroeconomic objective, as the unemployment benefits are draining the government revenues, but also represents a waste of human resources. (Sloman, Wride, 2009: 388) Another issue that affects the macro economy is inflation. This term signifies the rise in prices throughout the economy. The inflation rate is the measure of the annualized percentage change in a general price index, over time.( Mankiw 2002: 22–32) A high in...
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...cts the rates of inflation in the short-term. (Chang, R. ,1997 : 4-13) As far as the balance of payments is concerned, while the current count deficit fluctuates with the business cycle, the fundamental deficit may increase or decrease in the long run.
To conclude, according to the relationship between the four macroeconomic objectives and how they sometimes may conflict with each other, it is highly possible that due to the British government’s achievement of the macroeconomic policy of low unemployment, the inflation rates increased because of the growing shortages, possibly resulting to payment deficits and to a fall in exchange rates, making the imports more expensive as opposed to the exports and the UK goods less competitive in the international market, since due to the high demand the British market would probably require to absorb imported goods from abroad.
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