Government Economic Objectives

By Author: fed pats
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In the mixed economy, where the government has a major part in running the economy, they have some aims and targets to achieve for the economy. Out of the many surveys done, it is determined that there are four major objectives of the government. One is low inflation; other is low level of unemployment, economic growth and positive balance of payments.

Inflation occurs when the prices of commodities rise. Although inflation is necessary to sustain an economy, it should be kept as low as possible. The consequences of inflation are that the people’s real incomes drastically fall. For example if in $100, the people used to buy 3 KG meat, now they will only be able to buy $2.5 KG. Though the wages of people did not change, there real income fell, which means that they are able to buy very less things in the same amount of money. The prices of good in the country where inflation has taken place will be higher from the other counties. This may result in people tending to buy more foreign goods than the local ones and the country’s economic condition can seriously be worsened. This can result in the demolishment of many ...
... businesses and this will decrease aggregate demand, and increase unemployment. Therefore to avoid all such situations from happening, the government tends to keep the inflation rates very low.

Another major aim of the government is to keep the rates of unemployment low. This is because if more people are a country remains unemployed; this can result in serious consequences for the economy on the whole. First of all, when people will be unemployed, this will mean that not all of the resources of production are employed for the business. Thereby, the country’s overall output would not be the one it could have been if all the people were employed. Secondly, most of the government pays a fund or pension to the people who are unemployed. A higher rate of unemployment may mean that the government will have to incur increased expenditure to pay funds to all the unemployed people. If the people were employed, the money could have been invested for other economic developments procedures. To achieve such aims, the government plans to keep the rate of unemployment lower.

One of the main objectives of government is to achieve high economic growth. In other words, a country tends to achieve a higher GDP. When a country’s GDP fall, it can result in serious consequences. When GDP will be falling, very few workers will be actually required to produce fewer products. As a result more employees would be made redundant. This will increase unemployment. This can cause the standard of living of people to decline sharply and so people will be able to buy lesser things in a whole year than they used to do before. The people will not tend to expand their business, as they believe that there business can face a setback in this economic recession. Also foreign investors will be very reluctant to invest in the business. Because of all these consequences, the government keeps these objectives as their standard goals.
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