Question 4:

Explain thoroughly the Three Major Macroeconomic Goals per the Text below , and discuss (with examples) what conflicts may occur among these three goals (be sure to cover both parts of question.)

11-1 MACROECONOMIC GOALS SECTION CHECK 1 Keep the following questions in mind as you read through this section. 1. What are the most important macroeconomic goals in the United States? 2. What do macroeconomists do? Recall from Chapter 1 that macroeconomics is the study of the whole economy-the study of the forest, not the trees. Let us begin by looking at some of the major issues that ultimately drive macroeconomic decisions. 11-1a THREE MAJOR MACROECONOMIC GOALS Nearly every society has been interested in three major macroeconomic goals: (1) maintaining employment of human resources at relatively high levels, meaning that jobs are relatively plentiful and financial suffer- ing from lack of work and income is relatively uncom- mon; (2) maintaining 3 MAJOR MACROECONOMIC prices at a relatively GOALS stable level so that consumers and pro- High employment ducers can make bet- Stable price levels ter decisions; and (3) High economnic growth achieving a high rate levels of economic growth, meaning a growthin output per person over time. We use the term real gross domestic product (RGDP) to measure output or production. The term real is used to indicate that the output is adjusted for the general increase in prices over time. Technically, gross domestic product (GDP) is defined as the total value of all final goods and services produced in a given period of time, such as a year or a quarter. In short, macroeconomists look at the big pic- ture. Macroeconomists develop models that attempt to explain and predict the impact of economic poli- cies and how these affect production, employment, and the price level over time. Macroeconomists are also concerned about what makes the economy grow, because faster rates of economic growth lead to higher living standards. Fluctuations in output and prices can retard economic growth and create hardships. Macroeconomists will look at many different ques- tions like: Why is Real GDP so much higher in one country than another? Why does the price level rise sometimes and remain stable at other times? Why do employment and production rise in some periods and fall in others? And what can macroeconomic policymakers do to stimulate economic growth, stabilize price levels, and increase levels of employment? Accomplishing smooth, rapid economic growth in an environment of stable prices and low unemployment is no easy task. Sometimes the cure for one problem comes at the real gross domestic expense of another. In the product (RGDP) the coming chapters we will dis- total value of all final goods cuss the causes and possible and services produced in a remedies for high inflation, given period, such as a year or a quarter, adjusted for high unemployment, and inflation sluggish economic growth