Macroeconomic Objectives

The key macroeconomic objectives of modern economies are generally accepted as:

  • sustainable economic growth

  • price stability

  • full employment

  • a more equitable distribution of income

The economic problem still applies to the national objectives - a nation at any point in time has limited resources to meet unlimited wants

Economic Growth

An increase in the productive capacity of the economy and is measured by calculating the change in the value of production over time.


Target for Australia 3-4%

If its too low resources may not fully be employed (e.g. labour=unemployment)

If its too high inflationary pressures result and challenges the sustainability of scarce resources

Inflation

A general increase in prices and fall in the purchasing value of money.

Price stability = low rates of inflation

Target for Australia 2-3%

No inflation isn’t good and it means that the economy is not growing

This is important because inflation:

  • adversely affects the spending power of households and firms

  • erodes international competitiveness

  • distorts distribution of income

  • influences the allocation of resources throughout the economy

Unemployment

Occurs when someone is willing and able to work but does not have a paid jon

It is unrealistic to expect a ‘0%’ rate of unemployment - there is alaways going to be some type of unemployment for various reasons.

The objective is to achieve a rate of unemplyment consistent with the natural rate of unemployment - when at this point, there is what is called ‘full employment’.

Target for Australia: 4%

Equitable Distribution of Income

Equity, or economic equality, is the concept of idea of fairness in economics, particularly in regard to taxation or welfare economics.

Equity does not imply that everyone is as ‘well off’ as everyone else, but that all people have the opportunities to participate in economic activity.

It largely concerns the standard of living (a material concept) and level of welfare (a more general concept of well-being).

There is no target as such for the coefficient in Australia

Economic problems/Macro problems

The economic problem still applies to the national objectives - a nation at any point in time has limited resources to meet unlimited wants.

Not all objectives can be achieved at once, so there are choices to be made and trade-offs to be considered - EG:

Growth and unemployment tend to be compatible – however there are then inflationary risks with this.

Choices have to be made between alternative courses of action, and national economic objectives have to be prioritised.