Conflicts Between Macroeconomic Policy Objectives (AQA A-Level Economics): Flashcards

Achieving one objective makes another harder to achieve

Actual > trend output; low unemployment; rising inflation

Actual < trend output; high unemployment; low inflation

Statistical relationship between inflation & unemployment

Short-run Phillips curve

Vertical line

Unemployment rate where LRPC intersects at zero inflation

Shift LRPC leftward, reducing natural rate of unemployment

Expected rate of future inflation rises

Rising inflation + falling growth = narrow path for BoE