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Chapter 30: Macroeconomic Objectives

One of the two areas that the study of economics can be
split into involves looking at the economy as a whole, the
entire economys performance, structure and behavior. This
is macroeconomics.
A governments performance can often be praised or
criticized by how well it manages the economy. There are
many economic performance indicators and these often
become the governments aims when managing the
economy. These aims are called Macroeconomic
Objectives and there are four key indicators with a further
fifth becoming increasingly important in the modern world.
The Macroeconomic Objectives are:
Economic Growth
Inflation
Unemployment
Current Account Balance
Protecting the Environment
1. Economic Growth
Government wants Economy to Grow.
Growth in Economy means an improvement in
peoples living standards.
One recognized measure of economic growth is
GDP.
This measures total value of all goods and
services over a period of time.
2. Inflation
Government does not want inflation to be too
high and must aim to keep it low.
Inflation is said to exist if the general price
level is rising in the economy.
If prices are rising at a faster rate than peoples
incomes, people will not be able to buy as
much and will have a lower standard of living.
Inflation complicates business decision-making
as the value of money can be distorted, causing
uncertainty and possibly stunting growth.
3. Unemployment
Government wants to reduce unemployment.
A person is considered unemployed if he/she
wants to work but is unable to find a job.
Unemployment is a waste of recourses.
Unemployment is related to GDP.
Unemployment can cost the government
money if unemployment benefits are given.

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Living standards of the unemployed people
will be lower compared to those that work.
4. Current Account Balance
Government should aim to balance the current
account.
They try to equal the value of exports to the
value of imports, as a country must pay its way
when trading with others.
Exports are goods and services being sold
overseas.
Imports are goods and services being bought
from overseas.
5. Protect the Environment
Government wants to reduce the damage to the
environment.
Global Warming has alerted people around the
world, as there are an increasing number of
people concerned about damage done to the
environment.

KEY TERMONOLOGY
Macroeconomics- the study of the entire economy; ALL
firms, ALL goods and ALL FOPs.
Macroeconomic Objectives- the aims of the government
when managing the economy relating to key economic
performance indicators.
Microeconomics- the study of individual parts of the
economy.