AS Macro: Macroeconomic Performance

Macroeconomic performance refers to an assessment of how well a country is doing in reaching key objectives of government policy. The main aim of policy is usually an improvement in the real standard of living for their population. The term ‘real’ means that we have taken into account the effects of rising prices so that we get a better picture of how many goods and services we can afford to buy and consume.

Macroeconomic policy is not solely concerned with living standards. The bigger picture would take into account some of the following:

1. Jobs – are more people finding work in the jobs that they are suited to and which pay a living wage? How high is unemployment? Is the economy creating enough new jobs for people entering the labour market each year?
2. Prices –are price rises under control creating the conditions for price stability? Can the economy avoid a period of price deflation? Price stability refers to 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?
4. Growth – how successful has the country been in achieving growth in the short term and in laying the foundations for expansion in the future? Can grown be sustained especially in terms of its environmental effects?
5. Efficiency - is the economy managing to increase the efficiency of factor resources e.g. through higher productivity so that more goods and services can be supplied at lower cost?
6. Public services – have the benefits of growth flowed through into greater and improved provision of key government services such as education, health and transport?
7. The environment – the effects of economic activity on our natural and built environment have become ever more important over the years. Many economists now focus on whether an expanding economy is sustainable in terms of its environmental impact.

Macroeconomic performance covers a wide range of indicators – summarised as:

• Real GDP Growth (short term and long term)
• Jobs (unemployment and employment rates)
• Prices e.g. as measured by the annual change in the consumer price index
• Trade balances and measures of competitiveness
• Productivity of labour and capita inputs
• Average standard of living e.g. measured by per capita GDP (PPP adjusted)
• Quality and accessibility of public services

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. The fall out from the credit crunch and a recession in global trade, production and jobs has made it abundantly clear for people and businesses in Britain just how inter-connected the world is in an economic sense.

Understanding these connections will help you to improve your macroeconomics and allow you to score higher marks for evaluation in the AS macro paper.