The Goals of Macroeconomic Policy

The Goals of Macroeconomic Policy

Macroeconomics is concerned with the study of the economy as a whole. The main goals of macroeconomics are to achieve:
- An improvement in the standard of living of the population;
- A low unemployment rate;
- A low inflation rate.
A low rate of inflation is desirable in itself but also because it may help promote the other two objectives. These three objectives have to be achieved subject to two important financial constraints. The government must maintain a long run balance in the public finances and the balance of payments. There are also real constraints due to the availability of factors of production. Here we will consider these objectives, the associated constraints and the relationship between them.

1.1. A Rising Standard of Living
Economics is above all concerned with the factors that contribute to improving people’s well-being over the long run. In order to track the performance of an economy over time and to co...