. Choose TWO of the four macroeconomic objectives studied and:  State why governments / decision...

. Choose TWO of the four macroeconomic objectives studied and:

 State why governments / decision makers try to achieve the TWO macroeconomic objectives
 Identify key problems which may be encountered when attempting to balance these two objectives
 Evaluate the macroeconomic measures, employing fiscal and/or monetary policies, which could be taken to balance these two objectives.

The structure of your answer to this question should include a brief introduction, main body, and conclusion which summarises your views.

Solutions

Expert Solution

Two objectives of macroeconomics are -

Full employment
Price stability

Why government or decision makers try to achieve these two objectives?

Full employment - full employment objective is aimsed by the government due to various social and economic benefits. As at reaching full employment , government try to eradicate poverty due to which workers get trained and skilled for the job .Even the government aims at reaching full employment so that employed people will have to pay tax which will be the revenue for the government as well as Economic growth
Price stability - Through price stability government try to control both inflation as well as deflation whatever the situation may be. price stability helps in achieving ecnomic activities as well as employment through transparency of price mechanism.

key problems which may be encountered when attempting to balance these two objectives

Whenever government try to achieve full employment , so the deficit in full employment end up in increasing the inflation . Due to which government again has to maintain the price stability
Sometimes in way of achieving the Target of price stability Interest rates in long term period will move higher which may cause interference in investment decision as well as savings

macroeconomic measures, employing fiscal and/or monetary policies, which could be taken to balance these two objectives are -

Public Investment as well as infrastructure - sustainable program for the public investment and infrastructure will help to create job as well as increase the productivity and economic growth due to which government moves one step ahead to reach full employment
Monetary equlibrium - monetary equlibrium is state at which an economy is in a situation where Quality demanded is equal to quantity supplied

Rahul Sunny answered 1 year ago

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