Macroeconomic Objectives and Policies
There are 7 common macroeconomic objectives that governments strive for to provide stability:
- Economic growth – Governments aim for sustainable economic growth which is around 2.5% every year. However, developing countries may try to increase economic growth further.
- Low unemployment – Governments try to aim for full employment (or more accurately, they aim to get as close to the natural rate of unemployment as possible).
- Low and stable rate of inflation – Governments aim for low inflation; in the UK this is 2%. The Monetary Policy Committee uses monetary policy in order to achieve this rate of inflation.
- Balance of payments equilibrium on current account – Governments aim to achieve a balance between outflows and inflows on the current account. It is much more desirable than a long-term deficit or surplus.
- Balanced government budget – The government wants to have a controlled level of borrowing as to prevent large national debts. Therefore, the aim is to get government revenue to be close to (and usually slightly greater) than the government spending.
- Protection of the environment – Governments aim for long term environmental stability. In order to preserves resources for future generations, the government aims to use sustainable processes. Additionally, they try to reduce pollution by providing incentives for companies to invest in cleaner and greener technology.
- Greater income equality – Governments aim to reduce the income gap between the rich and poor in order to create a fairer society.