Governments have a tough job when it comes to reaching several big goals for the economy. Here are some of the problems they face:
Trade-offs: If a government tries hard to make the economy grow, it might end up causing prices to go up. This makes it harder to keep prices stable.
Unemployment vs. Inflation: There’s a concept called the Phillips Curve that shows a tricky relationship. When the government works to lower unemployment, it can sometimes make inflation rise.
Balancing Budgets: Trying to keep trade balances in check can mean that the government has to cut back on spending at home. This could hurt growth and job creation.
To deal with these problems, governments can use specific strategies. For example, they can coordinate their spending and monetary policies. This helps reduce the conflicts between their different goals.
Governments have a tough job when it comes to reaching several big goals for the economy. Here are some of the problems they face:
Trade-offs: If a government tries hard to make the economy grow, it might end up causing prices to go up. This makes it harder to keep prices stable.
Unemployment vs. Inflation: There’s a concept called the Phillips Curve that shows a tricky relationship. When the government works to lower unemployment, it can sometimes make inflation rise.
Balancing Budgets: Trying to keep trade balances in check can mean that the government has to cut back on spending at home. This could hurt growth and job creation.
To deal with these problems, governments can use specific strategies. For example, they can coordinate their spending and monetary policies. This helps reduce the conflicts between their different goals.