chapter 23 - policy conflicts

Question 1

environment vs competitiveness

Answer 1

high rates of economic growth are likely to result in high levels of negative externalities, such as pollution and usage of non renewable resources

Question 2

progressive taxes vs inflation

Answer 2

taxes to reduce inequality could lead to higher rates of inflation

Question 3

fiscal policy vs monetary policy

Answer 3

e.g. a higher VAT rate increases the price of goods for firms and consumers … inflationary

Question 4

interest rates vs inequality

Answer 4

the low interest rate could affect the distribution of income. savers only receive a small return on their savings… has affected pensioners in recent years

Question 5

economic growth vs the budget deficit

Answer 5

reducing a budget deficit requires less expenditure and more tax revenue. this would lead to a fall in AD, however, and as a result there will be less economic growth

Question 6

economic growth vs inflation

Answer 6

a growing economy is likely to experience inflationary pressures, but this will depend upon its capacity utilisation

Question 7

inflation vs unemployment

Answer 7

demand pull inflation is inversely linked to cyclical unemployment - the Philips curve

Question 8

economic growth vs current account

Answer 8

during periods of economic growth, consumers have high levels of spending- this can lead to more spending on imports. this leads to a worsening of the current account deficit