Conflicts Between Macroeconomic Aims (CIE IGCSE Economics)

Economic Growth & Inflation

• Increasing economic growth causes the economy to move closer to full employment
• Prices for remaining resources are bid up leading to inflation which may outpace the target inflation rate of 2%
  
  

• Economic growth often increases pollution, negative externalities & the depletion of non-renewable resources
• The higher the growth, the faster the depletion

• During periods of high economic growth, the profits the owners of the factors of production receive are disproportionate to any increase in workers' wages leading to greater inequality

Economic Growth & Balancing the Current Account

• Economic growth usually leads to higher incomes which leads to an increase in imports by households thereby worsening the current account balance
  
  

Low Unemployment & Low Inflation

• The closer an economy moves to full employment the less workers will be available for hire & wage inflation will help increase overall inflation
  
  

Low Unemployment & Balancing the Current Account

• When unemployment is low, incomes are higher & imports increase which worsens the current account balance
• Additionally, with low unemployment wages tend to increase which increases costs of production for firms & if they increase their prices, then the level of exports is likely to fall