Macroeconomic Objectives From The Conventional Perspective - Coggle Diagram
Macroeconomic Objectives From The Conventional Perspective
To Achieve Full Employment
Full employment does not mean that there is no unemployed or jobless people in the economy.Full employment refers to the level of employment rate where there is no existence of cyclical or involuntary unemployment. Thus, it is difficult to assume that full employment refers 100% of the labor force being employed. Some people are unemployed as they could be moving on to new jobs and choose to resign or they could be looking for another job.
The potential benefits of full employment in an economy are that available resources can be optimized efficiently. If more resources are employed, more output can be produced can translate into an improved economic growth
Theoretically, if full employment cannot be achieved at 100% then it will be impossible for unemployment rate to reach 0%. The crucial consequences of unemployment to the economy are wastage of available resources and social problems
To achieve price stability
Thus maintaining price stability is really important to policymakers.Theoretically, it refers to the efforts of ensuring that inflation rate in the country is kept as low as possible
This involves certain macroeconomic policies such as fiscal and monetary policies.Maintaining price stability is necessary to avoid uncertainty and disruption in the economy.
To Achieve economic growth
A business cycle portrays a series of cycles of economic expansion and contraction.There are four phases in a business cycle, trough,expansion,peak and recession
Expansion means a period during which aggregate output expands
Peak means the highest point of a business cycle where the business is producing at full capacity and the economy is at full employment
Recession means a period which aggregate output declines
Trough means the lowest point of a business is operating below capacity and unemployment is at a high level
To achieve an equitable distribution of income
Generally,policymakers try to ensure that there is no wide gap between rich and poor
Taxes are imposed to reduce the income gap between the higher group and the lower group income in order to control unequality
To achieve equilibrium in the foreign sector
Foreign sectors means economic beyond the political boundaries
It includes transactions such as imports and exports,investment in other countries and inter-country tourism.
A country will try to get an overall surplus of balance of payments (BOP) that indicates greater inflow than outflow money