2.6.1 Possible macroeconomic objectives

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    The government has four main economic objectives:

    • Stable economic growth
    • Low unemployment
    • Low and stable rate of inflation
    • Balance of payments equilibrium (positive balance of payments)

     

    The overall intention behind these policies is to provide macroeconomic stability.

    • Governments aim to have sustainable economic growth in GDP in the long term. In emerging and developing countries the aim may be increasing economic development before economic growth.
    • Low unemployment is aimed for as governments wish for as near to full employment as possible. Labour should also be employed in productive work. The target rate is 3% which accounts for frictional unemployment.
    • The UK target inflation rate is 2% measured by CPI. This is in order to ensure price stability for consumers and business and allow them to make long term plans. If the rate of inflation varies by more than 1% around this range then it must be explained by the Bank of England.
    • Governments aim for the current account to be satisfactory, to avoid a large deficit. This is usually near to equilibrium. A balance of payments equilibrium on the current account means the country can sustainably finance the current account, which is important for long term growth.

     

    Additional government objectives may include the following:

    • Balanced government budget
    • Protection of the government
    • Greater income equality

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