2.6 Flashcards

1
Q

Why is there a trade off between economic growth and inflation?

A

Increasing economic growth causes the economy to move closer to full employment. Prices for remaining resources are bid up leading to inflation

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2
Q

Why is there a trade off between economic growth and environments sustainability?

A

Economic growth often increases pollution, negative externalities and the depletion of non renewable resources. The higher the growth the faster depletion

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3
Q

Why is there a trade off between economic growth and balanced budget?

A

Economic growth driven by expansionary fiscal policy often requires a budget deficit

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4
Q

Why is there a trade off between economic growth and balancing the current account?

A

Economic growth usually leads to higher incomes which leads to an increase in imports by households thereby worsening the current account balance

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5
Q

Why is there a trade off between low unemployments and low inflation?

A

The closer an economy moves to full employment the less workers will be available for hire and wage inflation will help increase overall inflation.

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