Governments want four things at once. Sometimes, getting more of one means less of another.
Four aims, and where they pull apart
Economic growth
More real output and income.
Low unemployment
Jobs for those who want them.
Low and stable inflation
About 2% a year.
Fair distribution and sustainability
Income shared fairly; the environment protected.
The points to remember
- A conflict means a policy that helps one aim makes another worse.
- Whether there is a conflict depends on what causes the change.
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Does growth always bring inflation? It depends on what drives it.
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Remember it as: Demand-led growth: prices up. Supply-led growth: prices down.
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Low unemployment and low inflation can pull apart too.
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Growth against the other aims
Growth v environment
More output can mean more emissions and used-up resources.
Growth v equity
Gains may go mostly to owners and skilled workers: the Gini rises.
Growth v the trade balance
Rising incomes buy more imports: the current account worsens.
Paper 1 asked this in November 2024, as part (b) for 15 marks; May 2023 asked the opposite view.
Using real-world examples, discuss the view that high unemployment is a greater economic problem than high inflation.
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How the 15 marks are given
| Marks | What your answer needs |
|---|---|
| 13–15 | Theory fully explained, terms right all the way through, balanced evaluation, real examples fully developed to support the argument |
| 10–12 | Theory explained, terms mostly right, evaluation mostly balanced, real examples developed |
| 7–9 | Theory partly explained, some evaluation but one-sided, examples partly developed |
| 4–6 | Theory only described, evaluation superficial, examples only named |
| 1–3 | Theory stated but not relevant, no evaluation |