2.6.4 Conflicts between economic objectives

Question 1

How is there a conflict between economic growth and inflation?

Answer 1

Economic growth increases demand for labour in the economy. To compensate, more labour is required and therefore people are paid more. Further increasing the demand for goods and services. Demand pull inflation

Question 2

How is there a conflict between unemployment and inflation?

Answer 2

Low unemployment means more people in paid work. Leads to an increase in demand in the economy. Furthermore, low unemployment means firms have to offer higher wages to attract the next best worker. Firms will the increase prices to compensate leading to cost push inflation.

Question 3

How is there a conflict between economic growth and saving the environment?

Answer 3

High economic growth may lead to an increase in negative externalities such as pollution. Therefore damaging the environment