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Macroeconomic Policy 4ECQ 503 Mamun Miah 03148844 Business Management (a) Examine the difficulties which confront policy makers when they attempt to formulate macroeconomic policy. Macroeconomic policy is mainly concerned with attempting to intervene and change the functioning of the economy in order to improve its performance1. It is used by the government and Central Banks (Bank of England), usually intended to maximise growth while keeping inflation and unemployment down. To summarise macroeconomic policy involves three initial steps: 1. The determination of the policy objectives and the conflicts between objectives. 2. The formulation of policies, which are known as instruments, are consistent with attaining the objectives. 3. Some elementary cost-benefit calculations of policy effectiveness to ensure that the net benefits outweigh the costs involved. The four major objectives of macroeconomic policy are2: * Full employment- unemployment is to be avoided because it results in a decrease of output in the economy. In addition, unemployment reduces the incomes of former workers, increases poverty...

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