16) Conflicts Between The Macroeconomic Objectives Including phillips Curve

Question 0

How does Economic Growth cause a negative impact on the environment

Answer 0

-faster economic growth can cause more environmental damage
>environmentalist call for lower levels of industrialisation
-economists who favour economic growth
>believe this can lead to technological development to deal with environmental damage

Question 1

What are the 3 potential conflicts between the macroeconomic objectives?

Answer 1

• economic growth cause negative impact on the environment
• economic growth can negatively affect the current account of the balance of payments (x-m)
• raising interest rates to reduce inflation can effect the distribution of income

Question 2

How does economic growth negatively affect the current account of the balance of payments

Answer 2

-if economy growing quickly
> likely to buy more imports
> as consumer income rises
> reduce incentive to export

Question 3

How does raising interest rates to reduce inflation affect the distribution of income

Answer 3

-increase in interest rates
    >increase savings
-people pay more interest on mortgages 
-borrowing more expensive
-poor become more in debts
     >worser income
-better income for rich
-makes income distribution more unequal

Question 4

What is the relationship in the Phillips Curve

Answer 4

-money wage increase, unemployment decreases
>so firms offer more money to attract workers

-money wages decreases, unemployment increases
>firms offer less money so workers are more
competitive for jobs

-wages are a large proportion of firms cost
>changes in the wages cause changes in the
inflation

Question 5

What are the 2 evaluation of the Phillips Curve

Answer 5

-Philip curve shows that the Governments have a key role in macroeconomic management
> to make choice between low inflation and low
management
DISPROVE THE PHILLIPS CURVE
-stagflation (1970) UK
> increase in inflation and uneployment
- low boom (1997-2007)
> low unemployment and inflation