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Conflicting Goals In Economic Growth - School Essays

Conflicting Goals In Economic Growth

Goals of monetary policy are to "promote maximum employment, inflation
(stabilizing prices), and economic growth." If economists believe it's possible
to achieve all the goals at once, the goals are inconsistent. There are
limitations to monetary policy.

The term "maximum employment" means that we should try to hold the
unemployment rate as low as possible without pushing it below what economists
call the natural rate or the full- employment rate. Pushing unemployment below
that level would cause inflation to rise and thereby ruin the other objective--
stable prices, economic growth, which is our objectives in the long run.

Overall financial stability will lead to a ...

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environments than they do when
inflation is persistently high. This evidence is a comparison across countries
over long periods. The association between economic performance, measured by
growth of output or growth of productivity, and inflation. This indicates a
negative relation; that is, the higher the inflation, the lower the rate of real
growth.

Evidence suggesting that low inflation promotes growth has motivated
recent decisions by a number of central banks and governments, most notably New
Zealand. Canada, the United Kingdom and Sweden also have moved in recent years
to establish monetary policy with official low inflation targets. Decisions to
adopt a policy objective of low inflation suggest that other policy-makers are
reading the evidence pertaining to inflation and growth as we are.

Consistent attempts to expand the economy beyond its potential for
production will result in higher and higher inflation, while ultimately failing
to produce lower average ...

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Conflicting Goals In Economic Growth. (2006, May 8). Retrieved November 20, 2024, from http://www.essayworld.com/essays/Conflicting-Goals-In-Economic-Growth/45618

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PAPER DETAILS

Added: 5/8/2006 07:17:01 PM
Category: Economics
Type: Premium Paper
Words: 901
Pages: 4

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