What Are the Central Issues in Macroeconomics?

One of the main issues in macroeconomics is the question of how to achieve economic growth at a steady rate. Part of this goal is to ensure that the resources of the nation are fully engaged in economic activity, and the pursuit of full employment is a central issue — for this reason and for social and political ends. An important element in a national economy is the level of inflation, because high inflation erodes the value of the savings of the population and increases the costs of businesses. Governments also are concerned with international trading conditions and the balance of trade, which leads to the study of the balance of payments as an issue in macroeconomics. For social and political reasons, the distribution of incomes and wealth within a country is important for stability, and this is often seen as one of the important issues in macroeconomics.

The achievement of economic growth is a problem for all countries and is one of the most important issues in macroeconomics. Factors in economic growth include improvement in the human capital of a country through education and training as well as provision of sanitation and healthcare to ensure that the working population is healthy. Growth also is achieved through improvements in physical capital, such as buildings, machinery and transport. This may be pursued by devoting resources to research and development for the introduction of new technology, or the acquisition of new technology through acquisition or transfer from abroad.

The goal of full employment may be pursued by various policies, depending on the type of unemployment in the system. The two types of disequilibrium unemployment are classical unemployment and demand-deficient, or cyclical, unemployment. Classical unemployment may result from union bargaining and government regulation causing inefficiency in the labor market and could be reduced through reduction in regulation. Demand deficient unemployment may be reduced by increasing demand through fiscal and monetary policy. Other types of unemployment are seasonal, frictional and structural unemployment, of which the worst is structural unemployment resulting from the permanent disappearance of jobs in certain industries.

The level of inflation may affect savings, interest rates and the competitiveness of companies in international trade. Governments often try to use the fiscal and monetary tools at their disposal to keep inflation under control. Governments may try to deal with inflation by controlling increases in the money supply or adjusting the level of interest rates. International trading conditions also are one of the central issues in macroeconomics, and every country is concerned with improving its balance of payments, by encouraging exporters, for example. Macroeconomics also involves the study of ways to improve the distribution of wealth, such as progressive systems of taxation.