2.6.4 Conflicts and Trade-offs between Objectives

• Poverty Trap


  A disincentive to look for work or work longer hours because of the effects of the tax and benefits system.
• Phillips Curve

  Shows a trade-off between inflation and unemployment. A demand-side policy to reduce unemployment could conflict with price stability.
• Policy Asymmetry


  When a given change in interest rates affects different groups or different countries to a lesser or greater degree.
• Trade-off


  Choices have to be made between different objectives of policy
• Macroeconomic Conflicts

  -Economic growth and inflation

  -Unemployment and inflation

  -Economic growth and balanced current account

  -Budget deficit and economic growth

  -Economic growth and environment

  -Exchange rate stability and economic growth