Homework

Macroeconomic objectives

• The key macroeconomic objectives are
  • Sustainable economic growth
  • Price stability
  • Full employment
• Economic growth is defined as an increase in the real output of goods and services produced in a country
  • Measured in GDP
  • A desirable growth rate in Australia is 3% p.a.
    • We want to ensure sustainability and employment

Sustainability

• Encompasses means;
• Price stability
  • refers to low levels of inflation
  • The target is 2-3% p.a.
  • This is important; inflation adversely affects the spending power of households and firms
• Full employment
  • Occurs when everyone who is willing to work can find employment
  • We want a natural rate of unemployment - currently 4.5% of the workforce
• Must recognise personal goals
• We can implement this into the PPF curve by a shift to the right

GDP

• Is the total market value of final goods and services produced in a country in a certain period of time
• Can be nominal or real
  • Nominal is GDP before inflation
  • Real is GDP after inflation is accounted for
• This is demonstrated in the diagram below