Macroeconomic Problems and Macroeconomic Goals

Unemployment is a problem for the unemployed and for the community as a whole. The major hardship for the unemployed is the loss of income and status. The extent of the hardship depends on the circumstances of the unemployed and the duration of the unemployment.

The full-employment unemployment rate, or natural rate of unemployment, is the rate of unemployment at which increases in aggregate demand for output begin to spill mostly into price and wage increases instead of increases in output and employment. It prevails when shortfall unemployment has been eliminated. It includes normal amounts of frictional and seasonal unemployment, plus structural unemployment.

Inflation redistributes real income and wealth, producing losses for many members of the community. Debtors have gained and creditors have lost during recent U.S. inflations, since interest rates on debt securities have not risen by enough to compensate creditors for purchasing power losses. Redistribution of real income and wealth also has proceeded through the federal government's position as a gainer from inflation. Whether individual households gain or lose from this depends on their circumstance as beneficiaries of government spending on the one hand and as taxpayers and government creditors on the other.

The recent focus of attention on the problem of continued population growth in the face of limited natural resources suggests that economic growth may be a more important issue in developed nations in the future than it has been in the past.