2.6

Question 1

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

Answer 1

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

Question 2

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

Answer 2

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

Question 3

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

Answer 3

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

Question 4

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

Answer 4

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

Question 5

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

Answer 5

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