Full Employment

Stability

Economic Growth

Tradeoffs

However, the pursuit of one goal often restricts attainment of others. For example, policies that promote economic growth might create unemployment or policies that improve stability might limit economic growth. Macroeconomic goals are also often in conflict with the microeconomic goals of efficiency and equity.

Consider a few hypothetical situations, depicted by the hypothetical Republic of Northwest Queoldiolia, in which the pursuit of one goal limits achieving another goal.

• Full Employment and Stability: The Central Bank of Northwest Queoldiolia seeks to promote lower rates of unemployment through expansionary monetary policy. The economy expands, unemployment falls, and full employment is achieved, but inflation emerges from the over stimulated economy.


• Economic Growth and Full Employment: Seeking to keep pace with economic growth in neighboring Southeast Queoldiolia, the President of Northwest Queoldiolia enacts an intense program of scientific research and development. The program bears ample fruit, creating scores of new technological innovations that lead to high rates of economic growth, but implementation of the innovations disrupts the economy throwing millions of people who lack the necessary skills or training needed by the new technologies out of work.

Policies and Politics

In a mixed economy, the pursuit of these goals is largely directed by governments. This, of course, brings into play the wonderful world of politics and never-ending debates over which of these three macroeconomic goals is most worth pursuing with economic policies.

As the discussion turns to politics and policies, two viewpoints tend to emerge--liberal and conservative. Generalities are, of course, fraught with exceptions. However, with that caution in mind, note that each of the two political views have historically placed greater emphasis on the attainment of some goals over others.