Explain the main goals of macroeconomic policy and the policy tools available to achieve them, with reference to Sri Lanka.

1. 1 · Define macroeconomics. The study of the economy as a whole: total output, employment, the price level and trade.
2. 2 · Explain the goals.
   • Economic growth
   • Full employment
   • Price stability
   • External balance and sustainable debt
3. 3 · Draw the business cycle. [Diagram: real GDP over time with expansion, peak, recession and trough labelled around a trend line]
4. 4 · Contrast the schools. Classical (self-correcting markets) versus Keynesian (active demand management); monetarist emphasis on money.
5. 5 · Describe the tools.
   • Fiscal: spending, taxes, borrowing
   • Monetary: policy interest rates, money and credit
   • Supply-side: productivity, skills, competition
6. 6 · Sri Lankan application. Budget by the Ministry of Finance and Parliament; monetary policy by the CBSL; the 2022 crisis shows how goals conflict and connect.
7. 7 · Note conflicts between goals. Cutting inflation can raise unemployment in the short run; faster growth can widen the trade deficit.
8. 8 · Conclude. Macroeconomic policy balances several goals at once, using more than one tool.

Scoring tip: Name the Sri Lankan institutions correctly: the CBSL for monetary policy, the Ministry of Finance and Parliament for the Budget.