The three macroeconomic objectives are the objectives that a central government should work towards at the national, regional or local level. These are set by governments in terms of what would be considered a balanced scorecard. The four key macroeconomic objectives are: achieving the long-term interest rates, inflation, employment and budget balance. The balanced scorecard measures each of these objectives against benchmarks that are usually agreed upon by the members of the governmental board responsible for the maintenance of the macroeconomic objectives.
The long term interest rate is the interest rate that is set in order to keep the economy from being too sluggish. It is often called the base interest rate and is usually subject to market forces. In other words, the level of this rate is determined by economic indicators such as consumer spending, output and employment levels.
Accomplishing inflation is also one of the macroeconomic objectives. Prices are said to be inflationary when the price level is above the level of fundamentals that would be indicated by a fundamental analysis of price units. Deflation is considered to be a bad thing because it leads to a reduction in the volume of money supply. This is known as the monetarist approach. A balanced scorecard is used to track the macroprudential objectives of an organization to ensure that the macroeconomic objectives are met.
Employment is one of the most important of the macro objectives. The employment is measured in terms of the number of people in employment. The level of employment is also affected by the number of hours worked, the productivity levels and the overall economic performance of the country. All these things are taken into consideration in the determination of employment. Economic policies are meant to contribute to the fulfillment of the macro objectives.
Budgeting and monetary policy are two other key areas that are closely associated with the macro objectives. The budgeting refers to the management's strategy on how to channel the resources to meet the macroeconomic objectives. On the other hand, the monetary policy seeks to set the base rate of interest, the base rate of the interest income on reserves and other monetary instruments, and the balance of trade. Both these notions are formulated taking into account the macro-economic framework. The macroprudential policy seeks to ensure that the macroeconomic objectives are achieved . . . . . . by minimizing the risks arising from financial risks and adverse influences.
The use of economic indicators in achieving macro objectives has been a great help to the economists. It has made the task much easier, because it has made the calculation more accurate. However, there are still some limitations in using the indicators alone. The main limitations are as follows: