MACROECONOMIC OBJECTIVES

In each economy there are four main macroeconomic objectives: economic growth, full employment, price stability and balance of payments stability. Macroeconomic policy is aimed at achieving these objectives, with one of them usually selected as the main priority.

The pursuit of economic growth requires no further explanation. An expansion of national production and income is a prerequisite for job creation, improved living standards and economic development.

Likewise, the pursuit of full employment (or the combating of unemployment) should be an obvious objective of economic policy, particularly in South Africa, where unemployment is the main socio-economic problem.

Price stability means that inflation should be kept as low as possible. The costs of inflation are discussed in the section of inflation. At the time of writing, price stability is the main objective of monetary policy in South Africa.

The pursuit of balance of payments stability is particularly important in a small, open economy like that of South Africa. The authorities should aim at avoiding large balance of payments deficits which could, for example, result in sharp depreciations in the international value of the currency (the rand in our case).