In this blog we look at the main objectives of economic policy in the UK and other countries.
For example, the government might want to achieve an objective of a low rate of price inflation. The main instrument to achieve this are changes in monetary policy interest rates, since 1997 they have been set by the Bank of England. Fiscal policy could be another instrument to achieve this aim. This is in the hands of the government. Supply-side policies can also be used to control inflation and promote growth over the longer-term.
The government might have another objective to make the distribution of income more equal. It would then choose the policy instruments it thinks are best suited to reaching to this aim, perhaps a change in the income tax system or a rise in the national minimum wage.
The main policy instruments available to meet macroeconomic objectives are
Objectives of UK Macroeconomic Policy
The key objectives for the UK are:
Additional objectives of macroeconomic policy
What is meant by macroeconomic stability?
Macro stability is shown in particular by the volatility of a country's economic cycle. The chart below tracks the annual % change in real GDP for the UK economy including forecasts made at the time of the March 2016 Budget.