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…
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