Conflicts and Trade-offs

Question 1

Phillips Curve

Answer 1

The Phillips Curve shows a trade-off between inflation and unemployment. A demand-side policy to reduce unemployment could conflict with price stability.

Question 2

Policy asymmetry

Answer 2

When a given change in interest rates affects different groups or different countries to a lesser or greater degree.

Question 3

Trade-off

Answer 3

A trade-off implies that choices have to be made between different objectives of policy for example a trade-off between economic growth and inflation.