Conflicting Economic Objectives

Inflation and Unemployment

• When unemployment is reduced and the economy approaches full capacity, there are fewer spare workers so demand for them increases

• This leads to an increase in wages and therefore cost-push inflation

• Low unemployment may cause consumers to feel confident and spend more, resulting in demand-pull inflation

Economic growth and environmental protection

• New factories and increases in production can raise levels of air and water pollution, as well as increase the amount of waste that needs disposing of

• An increase in the use of non-renewable natural resources can occur

• Ecosystems might be damaged or destroyed by constructing new factories, housing etc.

Economic growth and inflation

• A rapidly growing economy can cause large increases in prices due to an increase in demand

• Attempts to keep inflation low can restrict growth

Economic growth and a reduction in welath inequality

Economic growth can increase inequality, as not everyone benefits equally from a growing economy.