trade offs

Economic growth and low inflation trade off

When the economy grows quickly, there is a rise in ad, increased consumption and investment means it grows faster than productive capacity, creating inflation. To combat inflation, the Bank of England uses monetary policies in order to raise interest rates to discourage spending an increase the level of saving, decreasing ad and slowing down economic growth, yet inflation has decrease- 2008 financial crisis inflation was low but growth collapsed, so allowed for inflation to rise to stimulate the economy

Evaluation

Supply side improve creating potential growth will increase lras allowing improvement for both

Trade of economic growth and balanced current account

When the economy rises, the level of income rises, meaning consumers have more disposable income to spend, and investment infreases, this may lead to inflation meaning exports worth increase, making exports less competitive abroad, becoming a withdrawal and decreasing economic growth, decrease of export led growth

An increase in disposable income further means there is an increased spending on imports, which worsened the current account

Evaluation

Depends on export led growth