Macro Objectives

• Macroeconomics is the study of the performance of an economy, focusing on indicators such as economic growth, unemployment, inflation, trade, and distribution of income.
• Economic growth is a measure of incomes and living standards, and the objective is for growth to be strong, sustained, and sustainable.
• Unemployment indicates the number of people in the economy that don't have jobs, and the objective is to keep unemployment low and employment high.
• Inflation is the rate of growth of prices in an economy, and the objective is to keep it low and stable.
• Trade involves the value of imports of goods and services compared to the value of exports of goods and services, and the objective is for trade to be balanced.
• Distribution of income is not just about incomes rising, but also about how those incomes are distributed across households in the economy, and the objective is for a fair distribution of income.
• Macroeconomics aims to achieve macroeconomic stability, which is when all four objectives of economic growth, unemployment, inflation, and trade are met at the same time.
• Macroeconomics also considers non-calm objectives, which are important but not in the core category, such as sound government finances, environmental sustainability, productivity growth, and labor productivity growth.
• What does CALM stand for in macroeconomics?


  Controllable, Attainable, Long-term, Measurable
• What is a CALM objective?


  A CALM objective is a desirable economic goal that is controllable, attainable, long-term, and measurable.
• Which of the following best exemplifies a CALM objective in macroeconomics?


  Maintaining inflation at 2% per year
• Why is maintaining inflation at 2% per year considered a CALM objective?


  It is controllable through monetary policy, attainable, focuses on long-term price stability, and is measurable.
• What characterizes non-CALM objectives?


  Non-CALM objectives do not meet one or more of the CALM criteria.
• What are some examples of non-CALM objectives?


  Examples include achieving perfect income equality and eliminating all government debt immediately.
• Why can non-CALM objectives be problematic?


  They may lead to ineffective policies or unrealistic expectations.
• What is a consequence of setting a non-CALM objective like "Eliminating all poverty within two years"?


  It can lead to a loss of public trust in economic policies when the goal isn't achieved.
• Which CALM criterion does the objective "Doubling the country's GDP within one year" primarily fail to meet?


  Attainable
• What are the implications of pursuing non-CALM objectives?


  • Ineffective policies
  • Unrealistic expectations
  • Short-term focus
  • Measurement challenges
  • Unintended consequences