- Macroeconomic objective
- A macroeconomic objective is a goal set for the performance of the whole economy, such as steady growth, low unemployment or low inflation.
- Macroeconomic policy
- Macroeconomic policy is the use of monetary policy, through interest rates, and fiscal policy, through government spending and taxes, to influence the whole economy.
Four main objectives for the UK economy
Can you name the four main macroeconomic objectives?
Each has a measure the government can be judged by.
Economic growth is a rise in real GDP, measured as the percentage change in inflation-adjusted output, and it raises living standards.
Can you think of an example?
Real GDP rises from £2,500 billion to £2,550 billion in a year: growth of 2 per cent.
Low unemployment means keeping small the share of the labour force without a job, since idle workers mean lost output.
Can you think of an example?
An unemployment rate of 4 per cent means 4 in every 100 people in the labour force are out of work and looking for it.
Low and stable inflation means keeping rises in the general price level small and predictable.
Can you think of an example?
With CPI inflation at the 2 per cent target, a basket that cost £100 a year ago costs £102 now.
Balance of payments equilibrium means that, over time, what a country earns from abroad on its current account roughly matches what it spends abroad.
Can you think of an example?
A country with a current account deficit of £30 billion a year must borrow abroad or sell assets to pay for it.