10.1 Government macroeconomic policy objectives
- Syllabus
- 9708–2026–2027
- Topic
- 10.1
- Level
- A2
Learning objectives
Judge macroeconomic success across seven stated objectives
A macroeconomic policy objective is an economy-wide outcome a government wants to achieve. A usable objective states the indicator, desired direction or target, and time horizon; the policy instrument is the action used to influence it.
| Required objective | What improvement means | Useful evidence |
|---|---|---|
| Inflation / price stability | Keep the general price level changing slowly and predictably; avoid both high inflation and persistent deflation | CPI inflation relative to the announced target and its duration |
| Balance of payments | Maintain a sustainable external position rather than an indefinitely financed imbalance | Current-account balance as a share of GDP, financing and reserve/exchange-rate pressure |
| Unemployment | Keep involuntary unemployment low while recognising frictional and structural unemployment may remain | Unemployment/employment rates, duration and type |
| Economic growth | Raise real output and productive potential sustainably | Real GDP growth and real GDP per head over time |
| Economic development | Improve broad material and human welfare, not output alone | Income per head plus health, education, poverty and other development indicators |
| Sustainability | Meet present economic needs without undermining future productive, social and environmental capacity | Resource use, emissions, natural-capital damage and long-run fiscal/external viability |
| Redistribution of income and wealth | Reduce an judged-excessive disparity in both income flows and asset ownership | Lorenz/Gini evidence, income shares, poverty and wealth distribution before and after taxes/transfers |
| Statement | Classification |
|---|---|
| Achieve stable prices or improve sustainability | Macroeconomic objective |
| Raise interest rates, VAT or government spending | Policy instrument |
| Provide one public good or regulate one monopoly | Primarily a microeconomic action unless linked to an economy-wide objective and transmission |
To compare countries or years: identify every given indicator; compare each with its explicit target, not merely zero; note the size and persistence of each gap; then make a balanced judgement across objectives. A country with strong growth but high unemployment or an unsustainable external deficit has not achieved all objectives.
Some goals can complement one another: higher sustainable growth often lowers cyclical unemployment, and low inflation may support external competitiveness. Others may conflict: demand expansion can reduce unemployment but intensify inflation or imports; rapid resource-intensive growth can weaken sustainability. The direction depends on spare capacity, supply conditions, time and policy design.
Price stability is low, predictable inflation—not necessarily a fall in the price level. Growth is not identical to development, and redistribution must include wealth as well as income. This card identifies and measures objectives; Topic 10.2 develops their causal relationships and Topic 10.3 evaluates instruments and policy conflicts.