Macro Economic Objectives

Fair income distribution

This goal is concerned with how to distribute income in the economy among the population. The
distance between the rich and the poor should not differ significantly. It is usually more in the light of
normative economics than positive economics.To achieve this goal, the government has several
instruments, including taxes and other social expenditures such as unemployment benefits and social
assistance.

Price stability

Price stability is important because the purchasing power of money is maintained. To get the same
number of items, you don’t have to spend more nominal money.Price stability requires a low inflation
rate. It is not the same as zero inflation. A stable low-moderate inflation rate is often considered ideal.
Some economists said it was 2% inflation, as targeted in some countries such as the United States.

High and sustainable economic growth

Economic growth is essential to increase people’s income and standard of living. It is usually seen as the
most important macroeconomic goal.When economic growth rises, output increases, and so does
income. A growing economy shows an increase in economic output. Businesses increase production,
recruit more labor and create more income for the household sector.Thus, without economic growth,
people will not be able to achieve a better standard of living. They cannot obtain a wide variety of goods
and services in large quantities and higher incomes by working.Sustainable means not only an increase
in real GDP but also potential GDP. An increase in the potential GDP shows you the production capacity
of the economy increases over time. The economy can produce more output without creating
inflationary pressures.Sustainable growth is achieved by increasing productivity, more output per unit of
input, such as labor. That is by improving the quality and quantity of production factors, including
through technological advances. By increasing productivity, we get more goods and services without
increasing production costs, resulting in lower prices.

1. Explain in brief how governments try to achieve fair income distribution by providing examples
from the case.
2. Explain in brief how governments try to achieve price stability by providing examples from the
case.
3. Explain in brief how governments try to achieve high and sustainable economic growth by
providing examples from the case.