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2.6.4 trade- offs between objectives and policies
a) trade-offs between macro objectives
how are conflicts caused by objectives
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Cards (10)
what is short run Econ growth caused by?
AD shifts right
due to an
increase
in
A.D
what happens if AD curve shifts right?
from AD to AD1 there's
an
increase
in
output and
a
decrease
in unemployment
what does a shift in the AD curve right have an impact on (negative)?
increases P.L
-
lack of competitiveness internationally
meaning
decrease in exports
,
rise in imports
and
worsening current account
of
B.O.P
S.R
Econ growth
what does an increase in A.D mean?
govt
only achieves
2
of the
Econ objectives
what does a shift in LRAS or (AS) do?
govt achieves all 4 main objectives at the same time
what's an example of a shift in the LRAS curve?
shifts to
LRAS 1- increase output
and
reduce employment- Price level falls
which
improves competitiveness- improves balance of Payments
what happens if the govt only uses demand-side policies?
conflict between objectives
what do supply-side policies help govt achieve?
achieve
4
main
macro objectives
in the
long run
LRAS