Macroeconomic Aims of

Government
Macroeconomics is concerned with the whole economy. The

main government aims for the economy are full employment,

price stability , economic growth, redistribution of income

and balance of payment stability.

 Full Employment
• This means people who are willing and able to work can find employment. Not

everyone wants to work or is able to work. These people are not in labor force(16

years to 64 years of age people). They are said to be economically inactive and are

dependent on those who are in labor force. They include children, the retired and

those engaged in full time education, home makers and those who are too sick or

disabled to work.

• Most economies think that it is not possible to have 0% unemployment.

They put the figure usually at 3%.

 Price Stability:

• Governments aim for price stability because it ensures greater economic

certainty and prevents the country`s products from losing international

competitiveness. If firms, households and workers have an idea about future

level of prices, they can plan with greater confidence.

• In seeking to achieve price stability, most governments are not aiming for a zero

percentage change in price. A common target is a stable inflation rate of 2%.

Economic Growth

• When an economy experiences economic growth, there is an increase in its

output known as actual economic growth.

• In the long run, for an economy to sustain its growth, the productive
potential has to be increased. Such an increase can be achieved as a result of

a rise in the quantity and quality of factors of production.

Redistribution of Income

• A government may seek to redistribute income from rich to the poor.

Governments redistribute income by taxing and spending. The rich are

taxed more than the poor. Government often help the poor in the form of

medical, education facilities, housing benefit and unemployment benefit

 Balance of Payment Stability

• Balance of payment record transactions between residents of a country and rest of

the world in the form of export earnings and import payments. Government wants

to value exports revenue equals to import payments.

• If expenditure on imports exceed from revenue of exports , country would be living

beyond its means (Deficit)

• If export revenue is greater than import expenditure, country citizens might demand

more no of goods than their availability. (Surplus)

Government Budget: is an estimate of government earnings and spending's

Budget Deficit: If government spending's are greater than government

earnings.

Budget Surplus: If government earnings are greater than government

spending's.