Coursework Example | Topics and Well Written Essays - 1250 words - 3

Coursework ExampleEquitable diffusion of income Protecting their parsimoniousnesss environment The order of importance of the objectives varies for different economies due to their different governments and institutions. close economies would consider inflation as the most important objective where as other economies with a much socialist approach would focus on equitable distribution of income and reducing unemployment. One of the conflicts governments might slope is the tradeoff between inflation, employment and gross domestic product result. When unemployment tends to fall in an economic boost and a surd GDP, the economy whitethorn face high inflation pass judgment, both direct-pull and cost-push and the power of money to buy in any case called the purchasing power parity falls. This may actually have counter effect than what it should have, that is, positive, due to a rise in GDP. Any policies that control inflation may also lower the employment rate, then achieving on e objective, but conflicting the other. The economy may also experience deflation, which is negative inflation and which over again lowers the employment rate, and raises the unemployment rate. Then there is the conflict between the objectives of economic growth and environmental protection. In an endeavour to shift the production frontier outwards, governments may have to forgo the fact that they are putting atmospheric pressure on the already scarce resources, and actually may lower the living standards which are objectives in close to all economies and may also deplete the scarce resources in their effort to grow. They may also imperil the sustainability of the environment for generations to come. The third conflict is between economic growth and inflation. Rising demand for goods and services may not only increase the price of output but also the price on inputs such as raw materials, energy prices and wages. And so this would lead to increasing inflation, and in some cases hyperinflation. China and India in 2010 faced this kind of accelerating inflation. Higher rates of inflation are also detrimental to economic growth since they affect profits, businesses and jobs. Interest rates curb the high rates of inflation and high interest rates actually appreciate the currency and have a negative impact on exports since they become pricy on the global market and their demand falls thus having a negative impact on the growth rate of the economy. The last conflict is between balance of payments and economic growth. A higher GDP is achieved when consumer demand is usually high. And this usually leads to a worsening of the balance of trade especially if the marginal liking to trade is high. (Mankiw, 2000) Lastly, the betterment of the balance of payment situation can actually boost growth in the economy, especially by exports, but may cause another objective to fail, that is, it might lead to demand pull inflation in certain cases. (Mankiw, 2000) Governments a lso have direct control over 2 of the economys macroeconomic policies fiscal and monetary policies. Fiscal policies deal with the economys cipher and are managed by the Legislative and Executive branches of the government. Monetary policies are conducted by the central bank of the economy or the Federal Reserve. Fiscal policy is a means by which government controls the economy by adjusting its spending and the tax rate. When the