5.1 Government macroeconomic policy objectives
- Syllabus
- 9708–2026–2027
- Topic
- 5.1
- Level
- AS
Learning objectives
Match macroeconomic policy to its objective
A macroeconomic policy objective is an economy-wide outcome the government wants to improve. At AS Level here, the required objectives are price stability, low unemployment and economic growth.
| Objective | What success means | Why government pursues it |
|---|---|---|
| Price stability | Avoid prolonged high inflation or deflation; the general price level changes slowly and predictably | Protect purchasing power and make household and firm planning more reliable |
| Low unemployment | Keep willing and able jobseekers without work to a low level | Raise actual output and incomes and reduce fiscal and social costs |
| Economic growth | Increase real output over time and, in the long run, productive potential | Expand income, consumption possibilities, employment and the tax base |
| Policy family | Broad instrument | Typical intended route |
|---|---|---|
| Fiscal policy | Government spending and taxation | Expansionary action can raise AD, output and employment; contractionary action can reduce demand pressure |
| Monetary policy | Interest rates, money or credit conditions | Lower rates can support spending and employment; higher rates can restrain inflationary demand |
| Supply-side policy | Measures affecting resources, incentives, skills, flexibility or productivity | Raise productive capacity and improve the economy’s ability to grow and employ resources |
If CPI is falling and unemployment is high, lower interest rates and higher government spending are expansionary choices intended to raise AD, output and employment and move the economy away from deflation. The policy is the action; price stability and low unemployment are the objectives.
Price stability does not mean every product price is frozen. This objective introduces how policy serves the three named goals; analysis of policy conflicts and trade-offs is explicitly outside the required AS scope here, while detailed policy transmission follows in Topics 5.2-5.4.