Macroeconomic Objectives and Instruments

Macroeconomic Objectives

Objectives are the goals / targets of government policy

There are 4 main macroecomic objectives:

High employment – the government wants to achieve an increase employment and eventually a situation where all those able and available can find meaningful work

Stable low inflation – the Government’s inflation target is 2.0% for the consumer price index.
Sustainable growth – growth of real gross domestic product – sustainable at around 2.5%

Satisfactory balance of payments – internationally competitive (exports = imports)

Macroeconomic Instruments

Instruments are the means by which these objectives might be achieved

The main policy instruments available to meet macroeconomic objectives are:

Monetary policy –changes to interest rates, the supply of money and credit and also changes to the value of the exchange rate

Fiscal policy – changes to government taxation, government spending and borrowing

Supply-side policies designed to make markets work more efficiently

Other Macroecomic Objectives

Rising living standards and a fall in relative poverty – cutting child poverty and reducing pensioner poverty.
Sound government finances – including control over state borrowing and the total national debt

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