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Cost push inflation
arises from increases in the costs of production. 

 
The number of unemployed at any time is measured by government statistics. 

 
Economic growth
may be measured by increases in the 
real 
gross national product (GNP) per head of 
the population. 

 
Macroeconomic policy objectives
relate to economic growth, inflation, unemployment and the balance 
of payments. 

 
Fiscal policy
provides a method of managing 
aggregate demand 
in the economy. 

 
If a government decides to use fiscal policy to influence demand in the economy, it can choose either 
expenditure changes or tax changes as its policy instrument. 

 
A government must decide how it intends to raise tax revenues, from 
direct or indirect taxes
, and in 
what proportions tax revenues will be raised from each source. 

 
Direct taxes 
have the quality of being 
progressive 
or 
proportional
. Income tax is usually progressive, 
with high rates of tax charged on higher bands of taxable income. 
Indirect taxes 
can be 
regressive
, 
when the taxes are placed on essential commodities or commodities consumed by poorer people in 
greater quantities. 

 
Monetary policy 
uses money supply, interest rates or credit controls to influence aggregate demand. 

 
The 
balance of payments accounts 
consist of a current account with visibles and invisibles sections and 
transactions in capital (external assets and liabilities, including official financing). 

 
A surplus or deficit on the balance of payments usually means a