There is conflict between some Economc Policy Objectives and the Central Economic Problem.
Some Economic Objectives are ”compatible” with one another, meaning that a increase in one does not harm, or even helps the other.
Compatible Policy Objectives
Economic Growth & Full Employment
Growth creates demand for G&S, and thus the resources used in production. Economic Growth improves material welfare, so aggregate demand will rise. which in-turn produces more growth as it provides stimulus. The fuller full employment, the closer to full potential an economy operates.
Full Employment & Equitable Income Distribution
Policies that lower unemployment should also coincidentally improve income distribution. This is because, ceteris paribus,more people with jobs, provides households more income to consume, save, and build wealth.
Price Stability & Economic Growth
Maintaining consistant and sustainable Economic Growth requires control of Inflation, control of inflation in turn improves Price Stabiliy.
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Efficient Resoruce Allocation, Productivity, and Economic Growth
Efficient allocation of resources improves Efficiency & Productivity,this in turn increases long-run aggregate supply, lowering the cost of supply, and reducing inflatioanry pressure, in turn helping Price stability as well.
Conflicting Policy Objectives
Policies that reduce demand pull inflation generally reduce economic gactivity as a whole. This reduces the demand for labour as a whole since there is less demand. In the opposite direction, expanding economic activity to improve unemployment puts upwards pressure on available resources and prices.
A booming economy places demand-side pressure on resources as it nears capacity. This leads to inflationary pressure as competition for resources pushes up prices.
Growth is associated wit hstructural change. drastic decline in some sectors of the economy, cause structural unemployment.
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Economic Growth & Equitable Income Distribution
Economic growth increases total GDP, though, especially in the short term, People employed in expanding sectors get more, Owners of these industries get disproportionality more since shares tend to gain in relative terms to their wealth.
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