Common Conflicts Between the Macroeconomic Objectives
- Policy decisions by governments often create trade-offs in the macroeconomic objectives
- Achieving one objective may come at the cost of worsening progress in another objective
An Explanation of the Common Trade-offs that Exist Between the Macroeconomic Objectives
Trade-off |
Explanation |
|
High economic growth and inflation |
|
High economic growth and environmental sustainability |
|
Economic growth and inequality |
|
|
Low unemployment and low inflation |
|
Exam Tip
If you are asked to explain a particular trade off, make sure you explain all of the steps in the process E.g. if economic growth increases too quickly, there is likely to be demand-pull inflation, which raises the cost of living for the citizens, resulting in them feeling poorer, as the purchasing power of their wage has decreased
