Section 4 - Government and the macroeconomy
Governments have different macroeconomic aims, and conflicts often arise between the choice of measures used to achieve them. Variables must be measured to consider the causes and consequences of change, and appropriate policies applied.

4.1 The role of government -  Syllabus aim is to understand the the role of government, locally, nationally and internationally.​
​Guidance
- Locally, nationally an  internationally.
 4.2 The macroeconomic aims of government - Syllabus aim is to understand the macroeconomic aims of government and possible conflicts.
​Guidance
- Economic growth, full employment/low unemployment, stable prices/low inflation, balance of payments  stability, redistribution of income.
- Reasons behind the choice of aims and the criteria that governments set for each aim.
- Possible conflicts between aims: full employment versus stable prices; economic growth versus 
balance of payments stability; and full employment versus balance of payments stability.
4.3 Fiscal policy - Syllabus aim is to understand the definition of fiscal policy, a budget & reasons for government spending and taxation.
​Guidance
- The main areas of government spending and the reasons for and effects of spending in these areas.
- Taxation as the main source of government revenue and the reasons for levying taxation.
- Examples of the different classifications of tax; progressive, regressive, proportional; and 
direct, indirect.
- The qualities of a good tax.
- The impact of taxation on consumers, producers, government and economy as a whole.
4.4 Monetary policy - Syllabus aim is to understand the definition of money supply, monetary policy & the effects of monetary policy on government
macroeconomic aims.
Guidance
- Changes in interest rates, money supply and foreign exchange rates.
How monetary policy measures may enable the government to achieve its macroeconomic aims.
4.5 ​Supply-side policy - ​Syllabus aim is to understand the definition of supply-side policy &the effects of supply-side policy measures on government macroeconomic aims.
​Guidance
- Possible supply-side policy measures include education and training, labour market reforms, lower  direct taxes, deregulation, improving incentives to work and invest, and privatisation.
- How supply-side policy measures may enable the government to achieve its macroeconomic aims.
4.6 ​Economic growth - Syllabus aim is to understand the definition & measurement of economic growth & causes and consequences of a recession.  
​Guidance
- Real Gross Domestic Product (GDP) and how it can be used to measure economic growth. GDP per head (capita).
- Meaning of recession and how a recession moves the economy within its PPC.
- How changes in total demand may increase the utilisation of resources and GDP – resulting in a
movement from inside toward the PPC.
- How economic growth shifts the economy’s PPC to the right and is caused by changes in investment,
technology, and the quantity and quality of the factors of production.
- The costs and benefits of economic growth in the context of different economies.
- The range of policies available to promote economic growth and how effective they might be.
​​4.7 Employment and unemployment - Syllabus aim is to understand the definition of employment, unemployment and full employment
​Guidance
The nature and causes of changes in the pattern of employment, for example increase in proportion 
of workers employed in the tertiary sector and formal economy as an economy develops; a greater proportion of women in the labour force due to changes in social attitudes; decline in the proportion employed in the public sector as a country moves towards a market economy.
- How unemployment is measured – claimant count and labour force survey – and the formula for the 
unemployment rate.
- Frictional, structural and cyclical unemployment.
- The consequences of unemployment for the individual, firms and the economy as a whole.
The range of policies available to reduce unemployment and how effective they might be.
4.8 Inflation and deflation - Syllabus aim is to understand the definition, measurement and control of inflation and deflation.
​Guidance
- Measurement of inflation and deflation using the
Consumer Prices Index (CPI).
- Causes of inflation: demand-pull and cost-push.
- Causes of deflation: demand-side and supply-side.
- The consequences of inflation and deflation for consumers, workers, savers, lenders, firms and the
economy as a whole.
- The range of policies available to control inflation and deflation and how effective they might be.