4 Major Objectives of Macroeconomics

In macroeconomic, the focus is shifts to the aggregate. The focal point is the economy as whole and not individual parts of it. Macroeconomics focuses on the growth of the total economy.

According to The World Bank, Objectives of macroeconomics focuses on the performance of economies – changes in economic output, inflation, interest and foreign exchange rates, and the balance of payments. Poverty reduction, social equity, and sustainable growth are only possible with sound monetary and fiscal policies.

Macroeconomics connects together the countless policies, resources, and technologies that make economic development happen. Without proper macro management, poverty reduction and social equity aren’t possible. Below are the major macroeconomic objectives

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4 Major Objectives of Macroeconomic

  • High Levels of Employment and Production
  • Stable Prices
  • Economic Growth
  • Equity in Distribution of Income

1. Employment and Production

High Levels of Employment and Production is one of  the objectives of macroeconomics. Gross output in an economy is produced by a combination of labour and capital, which are employed in the production process.

The output of an economy would be maximized if all its factors of production are all employed and are also efficiently used. Unfortunately, this is not always obtainable. Modern economics is characterized by gross unemployment and underemployment of factors of production, which therefore keep level of output permanently below potential or maximum output level.

Therefore, it is one of the goals of macroeconomics to see how available level of output can be brought close to its potential level by minimizing unemployment and underemployment of the main factors of production.

2. Stable Prices

Every country seeks to control rapid increases or fluctuations in its price level. This is because rising or fluctuating prices of goods and services may keep products out of the hands, of those who would otherwise be able to obtain them and, in so doing, change the distribution of the goods and services produced by the firms in the economy. Periods of rising prices are usually associated with the period of inflation.

Inflation occurs when there is a general increase in the price level. As we shall see later, inflation produces many negative effects and only little positive effect on an economy.

For instance, it reduces the purchasing power of those on fixed incomes like the pensioners. Additionally, inflation may also reduce levels of savings in the economy, since much money would now be required by households to make their basic purchases. However, despite the debilitating effects of inflation, many countries have found it difficult to control the rapid rate of inflation in their domestic economies.

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3. Economic Growth

This is the third macroeconomic goal. Economic growth refers to increases in the real output level. However, a major limitation of this growth is that it only recognizes changes in output level but neglects other welfare indicators, like, literacy level, life expectancy level, leisure, poverty level, etc.

In addition, it ignores the ever-increasing pollution and other social costs that may be associated with increasing output levels.

Despite its limitations, economy growth is still commonly accepted to reflect welfare level and every country desires a marked increase in her economy growth rate.

 4. Distribution of Income

This is another area which has increasingly crept into the realm of macro- economics.

It is now a stated macroeconomic objective of every country to promote equity in distribution of income, which is associated with increasing rate of economic growth.

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