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Explaining how Macroeconomic Performance can be Measured

AS, A-Level
AQA, Edexcel, OCR, IB

Last updated 22 Mar 2021

What is meant by macroeconomic performance?

Macroeconomic performance is how well a country is doing in reaching important objectives or key targets of government policy.

Objectives of Macro Policy
  • The main aim is an improvement in the average real standard of living
  • The term ‘real’ means that we have taken into account the effects of rising prices so that we get an accurate picture of how much we can afford to buy and consume.
  • The main aims are macroeconomic policies are to improve outcomes in these indicators:
  1. Jobs – how high is unemployment? Is the economy creating enough new jobs for people entering the lbour market each year? Are there sufficient opportunities for people looking for work?
  2. Prices –are price rises under control? Can the economy avoid a period of price deflation? Price stability refers to a period of low, stable, positive inflation of between 1-3% per year.
  3. Trade – is the economy performing well in trading goods and services with other countries? How competitive are British businesses in the global economy?
  4. Growth – how successful has the country been in achieving growth and in laying foundations for future expansion and development
  5. Development - the expansion of people’s freedom to live long, healthy and creative lives
  6. Efficiency - is the economy improving productivity so that more goods and services can be supplied at lower cost? Are we cutting the amount of energy we use per unit of output?
  7. Public services – have the benefits of growth flowed through into better provision of state services such as education, law and order, the National Health Service and transport?
  8. The environment – whether economic growth is sustainable in terms of environmental impact.
  9. Inequality of income and wealth - leaving aside changes in average living standards, has the economy made progress in achieving an acceptable distribution of income and wealth? Or has the gap between lower and higher-income families become wider leading to higher relative poverty?

Inter-related economies

The macroeconomic performance of any one nation is affected by events, policies and shocks in other countries. No economy is immune to what is happening in the global financial and economic system.

Here are some other indicators of macroeconomic performance

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