Govt. Economic Policy Objectives Conflicts ADD HERE Flashcards
Key objective of Govt. macro policy
- Strong/ Sustained Economic Growth
- Low Inflation
- Reducing Unemployment
- Equal balance of payments
Short-Run Economic Growth Definition
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.
Long-run Growth
Growth caused by an increase in the potential productive capacity of an economy.
Boom
The economy is growing quickly
AD is rising
Unemployment falling
Inflation / Overheating
Recession
When there is negative economic
Inflation v Employment
Phillips Curve
If employment increases, incomes increase, demand-pull inflation
Economic Growth v Environmental Protection
As the economy grows, natuaral resources become depleted and pollution increases.
Economic Growth v Inflation
As the economy grows, due to a fixed productive capacity (SR), positive output gaps arrise and resources must be rationed, demand-pull inflation
Inflation v BoP Position
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
Growth v Inequality
Economic growth can lead to growing inequality if benefits from growth are not felt by all members of society