Macroeconomics provides government policymakers with a set of tools that can be employed to help achieve certain macroeconomic objectives deemed desirable for a nation. For an economy to be considered healthy, three objectives must be met:
- Economic growth: defined as an increase in the nation’s output of goods and services over time
- Low unemployment: meaning that nearly everyone who is willing and able to work should be able to find a job, and
- Low inflation: meaning that the average price level of the nation’s goods and services should not increase too rapidly over time.
Measuring these three objectives requires the use of some simple mathematical formulas. Once they are known, we can use the basic production possibilities curve diagram to illustrate their effect on a nation’s potential output and its current equilibrium level of output.
This lesson will define the three macroeconomic objectives, show how it can be determined whether or not they are being achieved, and use a PPC model to illustrate them.