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TASEconomicsQuick questions
Macroeconomics
Quick questions on Economic Objectives and Indicators - TCE Economics (Tasmania)
4short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is economic growth?Show answer
Economic growth is an increase in the real output of goods and services over time, measured by real Gross Domestic Product (GDP). Real GDP removes the effect of inflation so we see genuine changes in output. Sustainable growth is the goal: fast enough to lift living standards and create jobs, but not so fast that it fuels inflation or harms the environment. Australia generally targets real GDP growth of around 3 per cent a year.
What is full employment?Show answer
Full employment means everyone willing and able to work at the going wage can find a job, which still allows for some frictional and structural unemployment. The unemployment rate is the number of unemployed as a percentage of the labour force:
What is price stability?Show answer
Price stability means low and steady inflation. Inflation is a sustained rise in the general price level, measured by the Consumer Price Index (CPI), which tracks the price of a representative basket of goods and services. The RBA targets inflation of 2 to 3 per cent on average over time. Both high inflation and deflation are harmful.
What are conflicts between objectives?Show answer
Objectives can clash. Pushing growth and very low unemployment can drive up inflation, while squeezing inflation may raise unemployment, a short-run trade-off illustrated by the Phillips curve. Policymakers must balance competing goals.
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