The macro economic objectives major conflicts

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  • Created by: Lottie
  • Created on: 11-05-12 10:47

The macro economic objectives major conflicts

1. Low unemployment (or full employment) and low inflation

  • . If a government tries to reduce unemployment through inflationary measures, such as lower interest rates or increased public spending, then the resulting reduction in unemployment will push wages, and then prices, higher.
  • when the government tries to control high inflation with higher interest rates and reduced spending, the resulting reduced consumer spending and lower investment will result in job losses
  • . Norman Lamont, Conservative Chancellor of the early 90s, famously said '…unemployment is the price worth paying for lower inflation.'

2. Healthy growth and low inflation

  • If an economy grows too quickly, especially if it is due to excessive consumer spending  then demand will outstrip supply and prices will rise
  •  the steps taken to keep inflation low, like relatively high interest rates, can often restrict



Great notes! Thank you very much :D

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