What is the government trying to achieve for the economy?
The four main macroeconomic objectives, what gross domestic product (GDP) measures, how living standards are judged, and the possible conflicts between objectives.
A focused answer for AQA GCSE Economics on the main macroeconomic objectives, what GDP measures, how living standards are assessed, and the conflicts between objectives.
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What this dot point is asking
AQA wants you to state the main macroeconomic objectives, explain what GDP measures, explain how living standards are judged, and recognise the conflicts that can arise between objectives. You should also be able to calculate GDP per head from GDP and population figures.
The main macroeconomic objectives
What GDP measures
A rising real GDP signals economic growth and usually more jobs and income. Economists use real GDP (adjusted for inflation) when comparing over time, and GDP per head when comparing living standards across countries of different sizes.
Judging living standards
GDP per head is a quick guide to average living standards, but it is imperfect because it:
- is an average that hides inequality (a few very rich people can raise the figure while most stay poor),
- ignores quality of life factors such as health, leisure, working hours and the environment,
- excludes unpaid and informal work (such as childcare and the black market),
- says nothing about what is produced (output of weapons counts the same as output of medicine).
Wider measures, such as access to healthcare, education and the Human Development Index, give a fuller picture.
Conflicts between objectives
These conflicts are why macroeconomic policy is so difficult: a government cannot simply maximise every objective at once. In practice it weighs them up, often prioritising low inflation and steady growth, and accepts that some unemployment or a modest trade deficit may be the price of meeting its other goals. The right balance also shifts with the economic cycle, with growth and jobs prioritised in a recession and inflation control prioritised in a boom.
Worked example
Try this
Q1. State two macroeconomic objectives of government. [2 marks]
- Cue. Any two of: economic growth, low unemployment, low inflation, a sustainable balance of payments.
Q2. Explain one limitation of using GDP per head to compare living standards between countries. [3 marks]
- Cue. It is an average that hides inequality, so a high figure can coexist with widespread poverty.
Exam-style practice questions
Practice questions written in the style of AQA exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
AQA 20186 marksExplain why GDP per head may not be a perfect measure of living standards.Show worked answer →
GDP per head is total output divided by the population, used as a rough guide to average living standards, but it has limits.
It is an average, so it hides how income is shared: a country can have a high GDP per head while many people remain poor due to unequal distribution.
It also ignores non-market and quality-of-life factors such as leisure time, pollution, health and the value of unpaid work, and it does not count the informal economy. A 6 mark answer makes the point that more output does not always mean better lives and names at least two clear limitations.
AQA 20204 marksCountry A has GDP of 600 billion pounds and a population of 30 million. Calculate its GDP per head. Show your working.Show worked answer →
GDP per head is total GDP divided by the population: .
It is easiest to work in matching units: 600 billion pounds divided by 30 million people equals (in thousands of pounds per million people simplifies to) pounds per person.
So GDP per head is 20000 pounds. Markers reward dividing GDP by population and keeping the units consistent. A common slip is forgetting that 600 billion divided by 30 million gives 20000, not 20 or 200.
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Sources & how we know this
- AQA GCSE Economics (8136) specification — AQA (2017)