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Overview

The main government macroeconomic policy aims are:

full employment
low and stable inflation
balance of payments equilibrium
steady and sustained economic growth
avoidance of exchange rate fluctuations
sustainable economic development

To achieve macroeconomic policy aims, a government will use a range of policy measures.

Monetary policy and fiscal policy

Monetary and fiscal policy are two of the most important functions of modern governments.

Monetary policy focuses on increasing or decreasing the money supply in order to stimulate the economy, whereas fiscal policy uses government spending and the tax code to stimulate the economy.

Supply-side policy

Supply-side policies are long-term strategies aimed at increasing the productive capacity of the economy by using policies to improve the quality and/or quantity of factors of production.

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Types of policies

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