2.6.4- Comflicts And Tradeoffs Between Objectives And Policies

Question 1

What is the trade off between growth and sustainability?

Answer 1

As the economy grows, more natural resources are used and pollution is created

Question 2

What is an example of conflicts between growth and sustainability?

Answer 2

China has rapid growth but lots of pollution

Question 3

What happens if the economy grows without damaging the environment?

Answer 3

It is slower and has higher costs

Question 4

What is the conflict between growth and balance of payments?

Answer 4

Some countries like India have rapid growth, so the industry has to produce goods for its own people, and the wealth of its people has led to increased demand for imported goods

Question 5

What is an example of a contrast for the conflict between growth and BoP?

Answer 5

China has massive growth due to productive exports so is in a surplus

Question 6

What is the conflict between unemployment and inflation?

Answer 6

-high unemployment means firms offer workers lower wages, so inflation reduces

Question 7

What is an example of a contrast to the unemployment and inflation conflict?

Answer 7

In the 1970s, we saw high unemployment and low inflation, called stagflation

Question 8

What will expansionary policies mean for different objectives?

Answer 8

-increases AD, output, employment, and growth
-increases inflation and may worsen BoP as demand is met by imports

Question 9

What do high interest rates mean for the objectives?

Answer 9

-decreases inflation
-damages long term investment, decreasing growth
-raises the value of the pound, decreasing exports and increasing imports
-affects distribution of wealth, as it benefits savers, tending to be older people

Question 10

What do low interest rates mean for objectives?

Answer 10

-increases income inequality as the rich hold a large proportion of their wealth in non money assets so aren’t affected much by interest rates, but lower class tend to have savings

Question 11

What do supply side policies mean for objectives?

Answer 11

-increase AS, so improves long term growth
-may decrease long term inflation but may increase it in the short term if they encourage investment as it will increase AD
-may increase income inequality as policies that lower benefits affect the poorest in the country

Question 12

What do fiscal deficits mean for objectives?

Answer 12

-reducing gov spending will reduce AD and growth and higher unemployment
-will affect income inequality as the poor are the ones who use gov services

Question 13

What do fiscal deficits mean for objectives?

Answer 13

-reducing gov spending will reduce AD and growth and higher unemployment
-will affect income inequality as the poor are the ones who use gov services