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Chapter 10: Macroeconomic Policy (page 196)

What are the main macroeconomic objectives of a government?

Short Answer

Expert verified

Economic Growth, Low inflation, low unemployment, price stability and sustainable balance of payments.

Step by step solution

01

Macroeconomic objectives

  • attain high levels of economic growth, maximize the standards of living within the country and improve the economic welfare of the country.
  • maintain low levels of unemployment and full employment levels.
  • Achieve price stability with the means of limiting and controlling inflation
  • Maintain a satisfactory balance of payments to avoid exchange rate problems in the long term.

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Most popular questions from this chapter

True or False. Larger MPCs imply larger multipliers.

Suppose that disposable income, consumption, and saving in some country are \(200 billion, \)150 billion, and \(50 billion, respectively. Next, assume that disposable income increases by \)20 billion, consumption rises by \(18 billion, and saving goes up by \)2 billion. What is the economy鈥檚 MPC? Its MPS? What was the APC before the increase in disposable income? After the increase?

If a \(50 billion initial increase in spending leads to a \)250 billion change in real GDP, how big is the multiplier?

  1. 1.0

  2. 2.5

  3. 4.0

  4. 5.0

Use your completed table for problem 1 to solve this problem. Suppose the wealth effect is such that \(10 changes in wealth produce \)1 changes in consumption at each income level. If real estate prices tumble such that wealth declines by \(80, what will be the new level of consumption and saving at the \)340 billion level of disposable income? The new level of saving?

Level of Output and Income (GDP = DI)
Consumption
Saving
APC
APS
MPC
MPS
\(240
\)244
-$4
1.016
-0.016
0.8
0.2
2602600100.8
0.2
28027640.985
0.014
0.8
0.2
30029280.9730.0260.8
0.2
320308120.962
0.037
0.8
0.2
340324160.9520.0470.8
0.2
360340200.944
0.055
0.8
0.2
380356240.9360.0630.8
0.2
400372280.930.070.80.2

True or False. Real GDP is more volatile (variable) than gross investment.
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