| What other Objectives may the Government Aim for [Not the 4 Macroeconomic Performance Indicators] | -More Equality with Income and Wealth
-Protecting the Environment
-Economic Stability
-Productivity and International Competitiveness |
| What is a Trade off? Why can it link to the 4 Macroeconomic Performance Indicators | -This is when doing 1 Thing means you sacrificed doing the Alternative [Opportunity Cost]
-This links with the 4 Macroeconomic Performance Indicators as Fixing one can lead to the others getting Worse
-How they do this is based on Value Judgements and which one is most Relevant - Major Unemployment Crisis will be Dealt with First, Accepting the Fact that Inflation will follow Through |
| Why can Short Run Economic Growth [Via AD] lead to Conflict between the 4 Macroeconomic Performance Indicators | -Output will Increase, meaning Economic Growth and Unemployment Levels Tank [Labour is Derived]
-But it will cause Prices to Increase meaning Inflation, and Exports will be Expensive so it will Fall. Imports may Rise due to Meet the Extra Output so the Balance of Payments may be Sour as well |
| Why can Shifts in AS or Long Run Economic Growth help all 4 Macroeconomic Performance Indicators | -Taking LRAS, the Shift will mean that More Output will be Made [Equilibrium will Shift] and Unemployment will Fall consequently
-Prices will also Fall leading to Disinflation and this can lead to Exports being more Competitive, which may Match the Imports needed to reach the Output |
| What is the Conflict between Unemployment and Inflation | -As Unemployment tanks and the Economy gets to Full Capacity, Demand for Workers [Skilled] Increases. This means Wages will have to Increase and thus Prices may go up as well [Cost Push Inflation] Consumers may also Spend more as Confidence is Up [Job Security] thus more Inflation [Demand Pull]
-Reducing Unemployment thus makes it harder to Keep Inflation at 2% |
| What is the Conflict between Economic Growth and The Environment | -New Factories can raise Air and Water Pollutions, as well as more Waste that needs to be Disposed off.
-Natural Resources will be used up - Problem if Non-Renewable
-Ecosystems be Damaged or Destroyed via Construction of new Factories, Homes. This can lead to Extinction |
| What is the Conflict between Economic Growth and Inflation [And the Balance of Payments] | -Very Fast Growing Economy means the Prices will Increase from Demand Pull Inflation. This makes Inflation higher than Wanted. And higher prices Exports means there will be Less [And more Imports]
-Keeping Inflation low can Prevent Growth. Interest Rates [eg] being kept High will discourage Spending meaning Economic Growth Tanks |
| What is the Conflict between Inflation and the Equilibrium of the Balance of Payments | -This can be Compatible or Not at times
-Inflation being low means Prices rise Slowly. If they rise more Slowly than other Nations, then Exports to other Nations will Increase and Imports Decrease. This is Good
-But if the Low Inflation is done by High % Rates then Foreign Investment will be Encouraged. This makes the Currency Stronger [Demand Increases] therefore making Exports Expensive and Imports Cheaper. This Worsens the Balance of Payments [ish as FDI is part of Balance of Payments] |
| What is the Conflict between Economic Growth and Wealth Inequality | -Economic Growth will Increase Inequality. Higher skilled Workers will be more in Demand meaning Higher Wage, while Lower Skilled workers will not get Higher Wages.
-Governments may use the Increased Tax Revenue from Econ Growth for: Welfare Payments, Progressive Taxes or Minimal Wage. But this can create Disincentives to work hard, and More Welfare Payments may discourage Working [Some can Help]
-Supply-side can help People to go to Work, Lower Labour Immobility, Encourage Growth and reduce the Welfare Budget |
