5.1 Government macroeconomic policy objectives

Question 1

Define the term “Inflation target”

Answer 1

The inflation rate a central bank is set to achieve.

Question 2

Explain a government’s macroeconomic policy objective of price stability.

Answer 2

Gov. seeks to achieve price stability. This means a low and stable inflation rate. (not 0 inflation)

Question 3

Explain a government’s macroeconomic policy objective of low unemployment.

Answer 3

Low unemployment = high output, high tax revenue, and lower expenditure on unemployment benefits.