Government macroeconomic policy objectives
| English | Chinese | Pinyin |
|---|---|---|
| conflict | 冲突 | chōng tū |
| full employment | 充分就业 | chōng fèn jiù yè |
| price stability | 物价稳定 | wù jià wěn dìng |
| balance of payments | 国际收支 | guó jì shōu zhī |
| trade-offs | 权衡取舍 | quán héng qǔ shě |
| Phillips curve | 菲利普斯曲线 | fēi lì pǔ sī qū xiàn |
The government's juggling act
- Every government wants the same things: a growing economy, jobs, stable prices, and trade that pays its way.
- But these goals often conflict 冲突 — chasing one can wreck another. That tension defines macro policy.
Macro objective lab
Classify policy examples by the macroeconomic objective they target.
The four main objectives
- Other goals: a fair income distribution and protecting the environment.
Governments use fiscal policy, government spending and taxation, to steer the economy
Which is NOT one of the four main macroeconomic objectives?
The four are growth, low unemployment, price stability and a sound balance of payments.
Price stability usually means keeping inflation low and stable (around 2%), not zero.
A small positive target avoids the dangers of deflation.
Match each objective to its measure.
Each objective has its own headline indicator.
Conflicts between objectives
- Boosting growth can push up inflation and suck in imports (worsening the trade balance).
- Cutting inflation with high interest rates can raise unemployment.
- Policy is about trade-offs 权衡取舍, not perfection.
The classic conflict. Stimulating demand to cut unemployment tends to raise inflation — the short-run unemployment–inflation trade-off (the Phillips curve 菲利普斯曲线).
Progressive, proportional and regressive average tax rates
Stimulating demand to reduce unemployment often causes:
The unemployment–inflation trade-off: more demand → fewer jobless but rising prices.
Because objectives conflict, macro policy involves making ______ between them.
You often improve one objective at the cost of another.
Measuring each objective
- Each objective has a headline indicator: real GDP growth, the unemployment rate, CPI inflation, and the current-account balance.
- Governments track all four to judge whether policy is working.
You've got it
- four main objectives: growth, low unemployment, price stability, balance of payments
- plus equity and the environment
- objectives conflict (growth vs inflation; inflation vs unemployment) — policy means trade-offs