2.6.1 - Possible macroeconomic objectives

• Possible macro objectives:

  • economic growth
  • low unemployment
  • low and stable inflation
  • BOP equilibrium on the current account
• Macro objective

  • Economic growth - In the UK, the long run trend of economic growth is about 2.5%. Governments aim to have sustainable economic growth for the long run.
• Macro objective

  • Low unemployment: Governments aim to have as near to full employment as possible. They account for frictional unemployment by aiming for an unemployment rate of around 3%.
• Macro objective

  • Balance of payment equilibrium on the current account: This is important to allow the country to sustainably finance the current account, which is important for long term growth
• Macro objective

  Low and stable inflation: In the UK, the government target is 2%, measured by CPI. This aims to provide price stability for firms and consumers and will help them make decisions for the long run
• To achieve their macroeconomic objectives, governments are able to manage demand through monetary or fiscal policy.