Inequality

Abstract

Macroeconomic policy has essentially two main preoccupations: stabilisation and growth. Stabilisation involves smoothing out fluctuations in the time-path of national income so that periods of boom do not alternate with periods of slump. Of course such fluctuations can never be entirely eliminated and so the purpose of stabilisation policy is to reduce the amplitude of the business cycle – that is to say, to reduce the differences between the peaks and the troughs of national income. Growth involves the increase over time of national income and this requires expansion of a country’s productive capacity. This, in turn, requires new investment in either physical or human capital.