5.1 Government macroeconomic policy objectives

Question 1

What are the 5 main Macro policies objectives for a government?

Answer 1

• Low and stable inflation
• Low unemployment
• Positive and sustainable economic growth
• Stable balance of payments (X=M)
• Low Income Inequality

Question 2

How much is a low and stable inflation rate?

Answer 2

2-5 %

Question 3

What is a policy the government can put in place for Economic Growth?

Answer 3

• Fiscal Policies
• Monetary Policies
• Supply-Side Policies

Question 4

What is the definition of low inflation (Price Stability) ?

Answer 4

A situation where inflation is low and predictable, avoiding excessive fluctuations.

Question 5

What does the objective of full employment mean?

Answer 5

A situation where all individuals who are able and willing to work can find employment. It does not mean zero unemployment but rather a level of unemployment that accounts for frictional and structural unemployment.

Question 6

How does a government reduce income inequality?

Answer 6

By progressive tax systems where there is a large tax proportion on the rich