Phillips curve trade-off
Lower unemployment may mean higher inflation in SR.
Conflicts between objectives
Key definitions
Growth vs inflation
Rapid AD growth may overheat economy.
Growth vs environment
Higher output may raise emissions.
Growth vs equity
Growth may widen inequality.
BoP vs growth
Rising AD may worsen current account.
Unemployment vs inflation
Classic policy dilemma.
Short run vs long run
Policies may help SR but harm LR.
Fiscal vs monetary mix
Coordination or duplication.
Supply-side time lag
Benefits years ahead; SR pain possible.
Political constraints
Electoral cycle affects policy choice.
Key concepts
No single policy achieves all objectives simultaneously.
Phillips curve weakened if expectations adjust (LR vertical at NAIRU).
Relevant tips
- Diagram backlog: Phillips curve essential here.
- Build evaluate paragraphs: 'it depends on spare capacity…'
Examples & case studies
- Diagram backlog: Phillips curve; AD/AS showing overheating.