What conflicts between macroeconomics objectives may occur in an economy?

The four macroeconomics objectives are; stable inflation, low unemployment, economic growth, and a strong balance of payments. Conflicts may occur between these objectives when in an attempt to achieve one objective another one is sacrificed. One example of this is the conflict between a low, stable inflation and low unemployment. If the government focus on achieving a low level of unemployment this may lead to a higher disposable income throughout the economy and lead to demand- pull inflation. This could lead to a rising inflation rate which may climb above the general target of 2%.Secondly a conflict may arise between economic growth and the balance of payments. When the government strive to increase economic growth, the value of imports may rise and become significantly greater than the value of exports. Imports may increase as firms will begin to increase the number of raw material imports such as oil to cope with increased demand pressure from the economy. The value of wages may also increase leading to an increased demand of foreign luxury goods such as German cars which further increases the value of imports.

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Answered by Thomas P. Economics tutor

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