Problems of economic growth, business, cycles and economic fluctuations, inflation, unemployment, poverty, etc., are some of the major macroeconomic issues. While the underdeveloped countries face the problems of lack of development, low living standards, poverty and chronic unemployment, the advanced capitalist countries suffer from cyclical fluctuations in output, income and unemployment.
The major macroeconomic issue for the less developed countries is to speed up rate of economic development to ensure better living standard of the people.
Control of business cycles and minimizing in income, output and employment caused by recurrent booms and recessions is a major macroeconomic issue for the advanced capitalist economies.
Inflation and deflation which affect both the developed as well as the underdeveloped countries also form a major macroeconomics issue. Inflation is particularly distressing for the poor and the fixed income group.
Unemployment is a major problem of the underdeveloped countries, but even the advanced countries suffer from cyclical unemployment. Thus, policies to speed up development in the less developed countries and maintaining the tempo of growth in the advanced economies are necessary to curb the evil of unemployment.
The fiscal policies are often used for stabilising economic activity and promotion economic development. with these objectives in view, the governments often spend much more their normal revenue receipts.
Excess of expenditure over revenue leads to budgetary deficit, which is largely met through public borrowings. Over the time, such recurrent budget deficits and borrowings lead to a ‘debt-trap’ where the government has to borrow even for payment of interest and loan installments. Such a situation is alarming and thus must be avoided.
Monetary policy is used to regulate money supply in the market. Interest rate is major instrument of regulating money supply. A high interest rate policy or tight money policy reduces the volume of money in the market while a low rate of interest or soft money policy expands money supply. The macroeconomic analysis enables the policy makers to choose appropriate economy policy instrument to achieve the desired economic objectives.
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