Objectives of economic policy

Inflation rate: the percentage increase in the price level over a period of time

Objectives of economic policy:

·         Economic growth: in the short run, an increase in rGDP, in the long run, an increase in productive capacity (the maximum output that the economy can produce). Governments stress the importance of steady and sustainable economic growth, which avoids fluctuations in economic activity. Sustainable economic growth: economic growth that can continue over time and does not endanger future generations’ ability to expand productive capacity. Governments often want actual economic growth to match trend growth (the expected increase in potential output over time. A measure of how fast the economy can grow without generating inflation)

·         Full employment: a situation where those wanting and able to work can find…