Answer to Question #93792 in Macroeconomics for Celest Alexander

Question

What is the macroeconomic objectives in the monetary policy to prevent a resurgence of inflation?

Answer 1

The main macroeconomic goals include:

• stable growth in national output;
• stable price level;
• high level of employment;
• maintaining a balanced foreign trade balance.

These goals are interconnected and interdependent.

As for measures to prevent inflation, note the following:

• repayment of inflationary expectations;
• conducting a course aimed at strengthening the purchasing power of the national currency;
• measures to reduce the budget deficit;
• the use of administrative measures (for example, compulsory delivery by exporters of part of the proceeds of currency to the state; restrictive measures to export foreign currency, etc.);
• stimulation of cash savings (increase in interest payments, the return of part of the “failed” as a result of inflation of savings to special target accounts, etc.);
• improvement and simplification of the tax system;
• confiscation-type cash reform

Research results show that, depending on the country, average annual inflation rates in the range of 1–5 percent provide the best conditions for economic growth.