2.6.4 Conflicts and tradeoffs between objectives and policies

Question 1

What are some potential MEO tradeoffs?

Answer 1

1- Unemployment and inflation
2 - Ec growth and inflation
3 - Economic growth and BOP
4 - Economic growth and inequality
5 - Economic growth and environmental degradation

Question 2

How is economic growth and income inequality a trade off of macro economic obj?

Answer 2

A growing economy such as China may create a higher amount of lower paid jobs and low quality jobs. Therefore increasing income inequality as a result of economic growth

Question 3

How can economic growth and the balance of payments conflict each other

Answer 3

• As economy and labour market are thriving this may lead to higher wages. This leads to higher levels of imports which make BOP worse off and reduces export revenue for firms. Worsens deficit.

Question 4

How can economic growth and preserving the environment trade off with each other.
Give EVAL

Answer 4

• As a company looks to expand their FOPs, this may lead to habitats being destroyed and lower biodiversity

EVAL : If growth is not commodity or natural resource driven, then this may be not harm environment such as services.

Question 5

How can inflation and economic growth be a cnflit ?

Give EVAL

Answer 5

• EC growth can lead to high demand pull inlfation due to conusmers having more disposable income as GDP per capita increases.
• EVAL : This may depend on where an economy is at on the business cycle and how large out put gap. For example if a country is in a deep recession demand pull inflation is needed.