2.6 Flashcards
Why is there a trade off between economic growth and inflation?
Increasing economic growth causes the economy to move closer to full employment. Prices for remaining resources are bid up leading to inflation
Why is there a trade off between economic growth and environments sustainability?
Economic growth often increases pollution, negative externalities and the depletion of non renewable resources. The higher the growth the faster depletion
Why is there a trade off between economic growth and balanced budget?
Economic growth driven by expansionary fiscal policy often requires a budget deficit
Why is there a trade off between economic growth and balancing the current account?
Economic growth usually leads to higher incomes which leads to an increase in imports by households thereby worsening the current account balance
Why is there a trade off between low unemployments and low inflation?
The closer an economy moves to full employment the less workers will be available for hire and wage inflation will help increase overall inflation.