What are the main macroeconomic objectives, and how is the performance of an economy measured against them?
2.1 Economic policy objectives: economic growth, low and stable inflation, low unemployment, a satisfactory balance of payments, and other objectives such as low inequality and environmental sustainability.
An OCR H460 answer to the macroeconomic objectives, covering economic growth, low and stable inflation, low unemployment and a satisfactory balance of payments, plus wider objectives such as low inequality and environmental sustainability, and how performance is judged and traded off.
Reviewed by: AI editorial process; not yet individually human-reviewed
Have a quick question? Jump to the Q&A page
Jump to a section
What this dot point is asking
OCR wants you to state the main macroeconomic objectives, explain how performance is judged against each, and recognise that the objectives can conflict, so a government must prioritise depending on the state of the economy. This frames the whole of macroeconomics.
The core objectives
Each objective is tracked by an indicator: real GDP growth, the Consumer Prices Index, the unemployment (or employment) rate, and the current-account balance as a share of GDP. The Bank of England and the Treasury monitor these to guide monetary and fiscal policy.
Wider objectives
Beyond the core four, governments increasingly pursue:
- Low inequality (a fairer distribution of income and wealth), measured by the Gini coefficient and the Lorenz curve.
- Sound public finances (a sustainable budget deficit and national debt).
- Environmental sustainability, recognising that GDP growth can carry environmental costs not captured in the headline figure.
These reflect a broader view of economic welfare than output alone, which is why measures such as the Human Development Index and well-being statistics supplement GDP.
Conflicts and trade-offs between objectives
Examples in context
- The 2021 to 2023 inflation surge. With CPI inflation peaking above 11 per cent, the Bank of England prioritised price stability, raising Bank Rate sharply even as that slowed growth.
- The 2008 to 2009 recession. With output collapsing and unemployment rising, policy prioritised growth and jobs through fiscal stimulus and ultra-low interest rates.
- Net zero. The UK's legally binding net-zero-by-2050 target shows environmental sustainability sitting alongside the traditional objectives, sometimes in tension with short-run growth.
Try this
Q1. State the four main macroeconomic objectives. [4 marks]
- Cue. Economic growth, low and stable inflation, low unemployment, a satisfactory balance of payments.
Q2. Explain one conflict between two macroeconomic objectives. [4 marks]
- Cue. For example growth versus inflation: demand-led growth near full capacity causes demand-pull inflation.
Exam-style practice questions
Practice questions written in the style of OCR exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
OCR H460/02 20205 marksExplain why there may be a conflict between the objectives of economic growth and low inflation.Show worked answer →
A short structured question. State the two objectives: economic growth (a rising real GDP) and low, stable inflation (the UK target is 2 per cent CPI).
Develop the chain: rapid demand-led growth raises aggregate demand toward or beyond full capacity, so spare resources are used up, shortages emerge and the price level is bid up, causing demand-pull inflation. Drawing AD shifting right along an upward-sloping AS shows both higher output and a higher price level. So pursuing fast growth can raise inflation, a short-run trade-off.
Markers reward a clear link from rising AD to higher output and a higher price level, ideally with an AD-AS reference, and a statement that the conflict is strongest near full capacity.
OCR H460/02 202212 marksAssess the view that economic growth should be the government's most important macroeconomic objective.Show worked answer →
A levels-of-response question. Knowledge and application: define economic growth and the other objectives (inflation, unemployment, balance of payments, plus inequality and sustainability). Explain why growth matters: it raises living standards, employment and tax revenue.
Analysis: develop how growth supports the other objectives (jobs, public services).
Evaluation: weigh the costs of growth (inflation if demand-led, a worse balance of payments through higher imports, inequality if gains are uneven, and environmental damage). Argue that the priority depends on the current state of the economy: in a recession, growth and jobs come first; with high inflation, price stability does. Conclude with a supported judgement rather than a fixed ranking.
Related dot points
- 2.1 Measuring growth: real and nominal GDP, GDP per capita, index numbers and the rate of growth, the difference between actual and potential growth, and the limitations of GDP.
An OCR H460 answer to measuring economic growth, covering real and nominal GDP, GDP per capita, index numbers and growth rates, actual versus potential growth, and the limitations of GDP as a measure of living standards and welfare.
- 2.1 Inflation: the CPI and RPI, how the index is constructed, demand-pull and cost-push causes, the role of the money supply, and the costs of inflation, deflation and disinflation.
An OCR H460 answer to inflation, covering the CPI and RPI and how the price index is constructed, demand-pull and cost-push causes and the role of the money supply, and the costs of inflation, deflation and disinflation.
- 2.1 Employment and unemployment: the measurement of unemployment (the Labour Force Survey and the claimant count), the types and causes of unemployment, and the economic costs of unemployment.
An OCR H460 answer to employment and unemployment, covering how unemployment is measured through the Labour Force Survey and the claimant count, the types and causes of unemployment (frictional, structural, cyclical, seasonal and real-wage), and the economic costs of unemployment.
- 2.1 Inequality: the difference between income and wealth, the measurement of inequality through the Lorenz curve and Gini coefficient, the causes of inequality, and the equity-efficiency trade-off.
An OCR H460 answer to inequality, covering the difference between income and wealth, the Lorenz curve and Gini coefficient, the causes of income and wealth inequality, and the equity-efficiency trade-off in redistribution.
Sources & how we know this
- OCR A Level Economics (H460) Specification — OCR (2023)