Bookelt 7 - MACROECONOMIC OBJECTIVES + POLICY ( trade offs and conflict)

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4 Terms

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what are the pottential trade offs with objectives

  • governements have a trade off between unemployment and inflation

  • PHILLIPS CURVE shows an inverse relationship

  • Overheating the economy = demand pull inflation

  • BOP worsens - consumers spending can cause a trade deficite = demand for spending on imports is higher then exports

  • POLLUTION

2
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Explain the kensyian LRAS curve and the conflict between growth and inflation

accelerating inflation is risky = an outward shift can cause a sharp rise in general price level if an economy is near full capacity.

3
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explain why there is a trade off with the BOP

  • when real incomes rise = consumers buy more imported goods = worsening of a countires trade balance

  • Fast growing countries may suffer from high inflation - worsen price competitiveness of domestic industires

4
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trade off with environment

more waste, climate risk, depletion of natural materials, loss of biodiversity