Government intervention in the economy is essential for achieving key macroeconomic objectives. These objectives include low inflation, reduced unemployment and sustainable economic growth. However, policymakers often face conflicts and trade-offs when pursuing these goals. This blog explores the complexities of government intervention. It focuses on the challenges of balancing conflicting priorities. The blog also examines the implications of these trade-offs. It shows how they are represented in models like the short-run Phillips curve.
Follow us on Instagram, Facebook and LinkedIn.
Book your online or in-person tuition session here.
Unlock our exclusive resources in our Mission Control hub.
FAQs
What are demand-side policies?
Demand-side policies, such as fiscal and monetary policies, focus on influencing aggregate demand to stabilise the economy.
What is the short-run Phillips Curve?
The short-run Phillips curve illustrates the inverse relationship between inflation and unemployment.
How do supply-side policies work?
Supply-side policies aim to increase the productive capacity of the economy. They improve factors like education, infrastructure and labour market flexibility.
What is the main trade-off in economic policy?
One of the main trade-offs is between reducing unemployment and controlling inflation.
How does government intervention affect economic growth?
Government intervention can promote growth through investment in public goods, but excessive intervention may lead to inefficiencies.
Subscribe to get access
Read more of this content when you subscribe today.
Leave a comment