The macroeconomic aims of government · IGCSE Economics

Temperatures continue to rise throughout the world. This affects the health of those who work outside and their productivity. Higher temperatures can also reduce the hours they work and their incomes. However, there are benefits for some entrepreneurs and their firms. For example, demand for air conditioners continues to increase. Higher output of a range of products can affect economic growth and poverty.

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Isle of Man fact file 2022 gross domestic product (GDP) $7.0bn insurance industry share of GDP 18.0% GDP growth rate 10.3% unemployment rate 0.7% The Isle of Man is an island located between the United Kingdom (UK) and Ireland. Its geographical location has helped to attract foreign labour and capital. In 2022, it had a very low unemployment rate and high GDP growth rate. The island has the same monetary policy as the UK but sets its own fiscal policy. Some fiscal policy measures have attracted many insurance firms to operate on the island. The Isle of Man is set to generate as much as 75% of its electricity from renewable sources by 2026. A higher percentage of renewable energy generation may reduce pollution and affect health and life expectancy. In addition, energy costs could also decrease which will affect secondary sector firms such as food processors. Table 1.1 shows the percentage of energy obtained from renewable sources and life expectancy in selected countries in 2021. Table 1.1 Percentage of energy obtained from renewable sources and life expectancy in 2021 country percentage of energy life expectancy from renewable sources (years) Bangladesh 1.6% 74.3 Timor-Leste 0.4% 69.5 Iceland 100.0% 83.0 Isle of Man 5.0% 80.5 Luxembourg 85.0% 82.8 Oman 1.9% 72.5 Goods are transported to and from the island by air or sea. The government has increased spending to improve the airport and move the economy’s production possibility curve (PPC). The increased spending was used to increase the number of employees and improve the airport building. This has affected the number of flight cancellations. However, some airport users are still not satisfied. Some industries are also dissatisfied as the government is not funding projects which affect these other industries directly. Firms deciding whether to invest in the Isle of Man consider several influences including the level of demand and labour availability. The market for goods and services on the island is very small. However, there is free trade with neighbouring countries. Foreign workers are attracted by the low cost of living in the Isle of Man. However, some workers stay for only a short period of time before moving to jobs elsewhere.

In 2023, India became the country with the largest population. This may affect the government’s macroeconomic aims. In 2018, the Indian Government cut the country’s corporation (corporate income) tax rate from 35% to 25%. Between 2019 and 2022, India’s inflation rate averaged 6%. Some economists suggested that to achieve its central inflation rate target, the government should cut its spending.

One of the world’s more expensive roads opened in Montenegro in 2022. To build the road, the Montenegro Government was helped by a foreign commercial bank and another multinational company (MNC). This new road could help the Montenegro Government achieve its macroeconomic aims and increase Montenegro’s international trade. MNCs can have a significant impact on the host countries in which they locate.