Links between macroeconomic problems
Introduced| English | Meaning |
|---|---|
| unemployment/ʌnemˈplɔɪmənt/ | The state of being without work while willing and available to work and actively seeking a job. |
| inflation/ɪnˈfleɪʃn/ | A sustained increase in the general price level of goods and services. |
| Phillips curve/ˈfɪlɪps kɜːv/ | A relationship between inflation and unemployment, often represented as an inverse association in the short run. |
| current account/ˈkʌrənt əˈkaʊnt/ | The part of the balance of payments recording trade in goods and services, primary income and secondary income. |
| natural rate/ˈnætʃərəl reɪt/ | natural rate |
When fixing one problem creates another
- Cut unemployment 失业 by boosting demand — and watch inflation 通货膨胀 rise. The big macro problems are linked, not independent.
- Seeing these links is what separates a sophisticated answer from a naive one.
Macro objective lab
Classify policy examples by the macroeconomic objective they target.
The Phillips curve shows a short-run trade-off between:
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Lower unemployment tends to come with higher inflation in the short run.
The curve showing the inflation–unemployment trade-off is named after ______.
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The Phillips curve.
The Phillips curve 菲利普斯曲线
- The Phillips curve captures the short-run trade-off between unemployment and inflation: push unemployment down and inflation tends to rise.
Lower unemployment comes at the cost of higher inflation — the short-run Phillips trade-off.
Rapid economic growth can worsen the current account because it:
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Higher incomes raise import spending, widening a trade deficit.
Many economists argue the unemployment–inflation trade-off holds only in the short run.
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In the long run unemployment tends back to its natural rate regardless of inflation.
Match each pair of linked problems.
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Solving one problem often aggravates another.
Other links
- Growth vs inflation: rapid growth can be inflationary if supply can't keep up.
- Growth vs current account 经常账户: a boom sucks in imports, worsening the trade balance.
- Growth vs environment: more output can mean more pollution and resource use.
The long-run twist. Many economists argue the Phillips trade-off holds only in the short run; in the long run, unemployment returns to its natural rate 自然失业率 whatever the inflation rate.
The four macroeconomic objectives
Why it matters
- A policy aimed at one problem (e.g. cutting inflation) has side effects on others (e.g. raising unemployment) — which is why evaluation is essential.
You've got it
- macro problems are linked: the Phillips curve trades unemployment against inflation
- growth conflicts with inflation, the current account, and the environment
- the short-run trade-off may vanish in the long run (natural rate of unemployment)