2.6.4

• What is the trade-off between economic growth and inflation?

  Growth can lead to inflationary pressures
• How does economic growth affect the current account?

  High spending can worsen the current account deficit
• What is the relationship between economic growth and the government budget deficit?

  Reducing the deficit can lower economic growth
• How can supply-side policies limit the trade-off between unemployment and inflation?

  By reducing structural unemployment without raising wages
• What are potential policy conflicts and trade-offs?

  • Environmental policies vs competitiveness.
  • Fiscal vs monetary policy impacts.
  • Interest rates vs income inequality.
• What can be an unintended consequence of indirect taxes?

  Reduced competitiveness and decreased SRAS