When setting the final goal for Canada's government, it is important to identify the long-term goals of the government, as well as those of the private sector. In addition to establishing the benchmark of a realistic expectation for the rate of inflation, a central focus must also be established on the unemployment rate. One approach used to track the employment rate is the gross domestic product (GDP) model, which factors in the rate of inflation and other factors to establish the long-term goal of the unemployment rate. The key drivers of inflation are the balance of trade, nominal GDP growth, and interest rates.
Given that the current state of the global economy leaves no room for short-term stimulus or protection, it is prudent for the government to outline the 3 major macroeconomic goals of the government. These include establishing the benchmark of a realistic expectation for the rate of inflation, establishing the long-run unemployment rate, and defining the roles of market institutions in promoting economic welfare. A successful process of economic recovery will depend on the ability to properly establish the three macroeconomic goals and the means by which they are achieved.
One of the most important of the 3 major macroeconomic goals is establishing a level of sustainable and consistent growth in the rate of inflation. To be able to do this, the government must be able to control the increase in the price level of basic goods such as food and fuel. Price inflation is closely linked to the degree of governmental control over the release of essential goods. In Canada, the control of price increases rests primarily on the level of general business capacity. To ensure the consistency of inflation, the government should consider the use of interest rates, regulatory price controls, and the use of natural resources as a source of supply. Moreover, it is important to remember that even the most successful governments will have to rely on external sources of funds in order to successfully achieve their long-term objectives.
The other two goals of the 3 major macroeconomic goals are reducing the employment rate and increasing the level of full-time workers. The reduction of the unemployment rate is often considered to be more difficult than the increase in the unemployment rate. However, although the unemployment rate can affect the ability of a country's economy to achieve its long-term objectives, the impact of unemployment on the overall rate of inflation is not as negative. Therefore, it may prove to be more challenging for a country to achieve its long-term objectives if the employment rate remains at current levels.
The third goal is to increase the level of full-time workers. The use of direct measures of inflation can often provide a better picture of the inflationary or deflationary effects of changes in the general conditions of the economy. Indicators of inflation include the yield on 10-year treasury bonds, various inflation measures derived from official statistics, and indicators of price inflation derived from retail price surveys. A key ingredient of the success of the efforts to increase the number of full-time workers is the successful functioning of the informal economy, . . . . . . which includes discouraged workers, part-time workers, involuntary unemployment benefits and other forms of in-work incentives.
All the three goals discussed above are necessary in achieving the desired level of economic growth. As stated earlier, increasing the purchasing power of the currency through increased exports is one such measure. Increasing the value of all final goods and services produced domestically can be achieved through increasing the demand for products. And by ensuring the smooth functioning of the formal and informal economies, gradual increases in the value of all goods and services produced domestically will be realized.