2.6.4 Conflicts and Trade Offs

1. ... policy conflicts: Policies that improve infrastructure will improve the efficiency of the economy but are likely to damage the environment (6, 4)
5. Economic growth versus ... : Growth usually occurs because of an increase in aggregate demand, but increased aggregate demand also increases the price level. The only way to increased economic growth without increasing ... is to increase AS (9)
6. Inflation versus ... : The Philips curve shows the relationship between inflation and ... and shows that high ... leads to low inflation and vice versa. It means that when there is lower ... production costs become more expensive and prices increase (12)
7. There could be conflicts between ... objectives because when trying to improve one objective, another may be impaired. Most famous trade off is the Philips curve between Inflation and unemployment (13)
8. Economic growth versus ... : Economic growth creates rising incomes, which means people will spend more on imports. More imports will lead to a worsened trade deficit (7, 7)

2. Long-run and Short- run ... curve: In the short run, ... idea about inflation and unemployment is true, but in the long run, the unemployment rate is natural and doesn't change whereas the level of inflation will (7)
3. ... conflicts: Increased government spending may help boost an economy out of a recession, but increased spending will be likely a result of increased taxes in the future. This increased tax could reduce the incentives to work and income distribution (6, 6)
4. Economic growth versus ... : Pollution and ... damage is a social cost and a negative externality as a result of economic growth (11)
9. ... conflicts: The Bank of England has control over interest rates, but increased interest rates can be damaging for people, especially new homebuyers. This will lead to a worse income distribution and could reduce competition between businesses (8, 6)

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