Question

How can policy makers use their policy instruments to achieve their domestic policy goals?

Answer 1

The three domestic macroeconomic goals are:
1. GDP
2. Low unemployment
3. Low inflation

GDP: Final market value of all the final goods and services in terms of dollar value or currency value. So, governments lower taxes which would help to increase GDP as investments increase
Low unemployment: By decreasing taxes and increasing government spending on creating infrastructure for development, the employment levels increases
Low inflation: To keep prices under control government uses bonds or treasury bills to reduce the money supply in the market, so that price levels decreases.