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Explain how the following Government policy objectives may conflict with each other - Leaving Cert Economics - Question 8 - 2017
Question 8
Explain how the following Government policy objectives may conflict with each other. Economic growth versus Balance of Payments equilibrium: Economic growth means ... show full transcript
Worked Solution & Example Answer:Explain how the following Government policy objectives may conflict with each other - Leaving Cert Economics - Question 8 - 2017
Step 1
Economic growth versus Balance of Payments equilibrium:
Answer
Economic growth often leads to increased consumption and higher levels of imports. For example, as employment rises due to economic growth, households might buy more foreign goods, exacerbating the trade balance. This situation may place pressure on the Balance of Payments, particularly in countries with high Marginal Propensity to Import (MPM), resulting in a deficit.
Step 2
Economic growth versus a Just Social Policy:
Answer
Economic growth may inadvertently increase income inequality, benefiting those at the top more than those at the bottom. To ensure a more equitable distribution of wealth, the government may implement high taxes on wealthier individuals to fund social programs. However, such high taxation could deter investment and economic activity, thus hindering overall economic growth.