Possible Conflicts Between Macro Objectives

Question 1

Conflicting aims

Answer 1

• unemployment and inflation
• economic growth and inflation
• economic growth and BoP
• economic growth and inequality

Question 2

How is there conflict between inflation and unemployment

Answer 2

Falling unemployment might create demand-pull and cost-push inflationary pressures leading to a fall in the value of the money

Question 3

How is there conflict between economic growth and environmental sustainability

Answer 3

Rapid growth and development frequently puts extra pressure on scarce resources threatening the sustainability of future living standards

Question 4

How is there conflict between economic growth and inflation

Answer 4

An overheating economy may suffer accelerating inflation which then has negative effects on trade performance, business profits and jobs

Question 5

How is there conflict between economic growth and the BoP

Answer 5

Strong GDP growth fuelled by high levels of consumer demand for goods and services might lead to a worsening of the trade balance. This is particularly true when an economy has a high marginal propensity to import.