Govt. Economic Policy Objectives Conflicts ADD HERE Flashcards

1
Q

Key objective of Govt. macro policy

A
  1. Strong/ Sustained Economic Growth
  2. Low Inflation
  3. Reducing Unemployment
  4. Equal balance of payments
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2
Q

Short-Run Economic Growth Definition

A

Short - run analysis assumes that the quality and quantity of the FoPs are fixed, meaning that capacity does not change.

= The %change in real national output.

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3
Q

Long-run Growth

A

Growth caused by an increase in the potential productive capacity of an economy.

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4
Q

Boom

A

The economy is growing quickly
AD is rising
Unemployment falling
Inflation / Overheating

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5
Q

Recession

A

When there is negative economic

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6
Q

Inflation v Employment

A

Phillips Curve
If employment increases, incomes increase, demand-pull inflation

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7
Q

Economic Growth v Environmental Protection

A

As the economy grows, natuaral resources become depleted and pollution increases.

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8
Q

Economic Growth v Inflation

A

As the economy grows, due to a fixed productive capacity (SR), positive output gaps arrise and resources must be rationed, demand-pull inflation

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9
Q

Inflation v BoP Position

A

Low inflation increased demand for UK exports, reducing a deficit (increasing a surplus)

Depend on whether it is done by high interest rates - increased demand for £ - SPICED - worsen BoP

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10
Q

Growth v Inequality

A

Economic growth can lead to growing inequality if benefits from growth are not felt by all members of society

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