Conflicting MEPOs

Question 1

Unemployment and inflation conflicts

Answer 1

Proved by the Phillips Curve

Question 2

Economic growth and equality (3)

Answer 2

• EG creates opportunities for the highly skilled and educated
• Benefits and min wage will not rise in line with inflation
• Where as highly skilled workers, home owners and shareholders will see a real income rise

Question 3

Economic growth and the environment (5)

Answer 3

• More fossil fuels consumed
• More extraction of raw materials: natural habitats
• Pollution
• Negative externalities
• Environmental Kuzners curve

Question 4

Economic growth and the balance of payments

Answer 4

• When EG is led by consumer spending it tends to cause a deficit (MPW)
• High EG may increase inflation and make exports less competitive
• Growth in the supply side of the economy will improve international competitiveness and create surplus

Question 5

Economic growth and Inflation

Answer 5

When the economy grows it’s more likely inflationary pressures will increase (rising wages lead to increased consumption)

Question 6

Economic growth and inflation: working together (2)

Answer 6

• Supply side growth won’t conflict with inflation
• If there is slack in the economy growth won’t be inflationary

Question 7

Balance Gov budget and EG

Answer 7

• Gov may feel it needs to reduce the deficit, this requires higher taxes and lower spending
• However this will lead to a fall in AD and lower EG

Question 8

Balanced Gov budget and EG: “expansionary austerity”

Answer 8

Trying to lower the budget may lead to growth-expansionary fiscal contraction (crowding in and greater efficiency)