6.5 Government policies and conflicts To compare fiscal, monetary and supply side policies.2 To understand that policies to achieve one objective might have adverse effects on other policy objectives.

Comparing policies. Fiscal and Monetary policy affect total demand. Supply side economics affects supply. No policy will have immediate affect but supply side more long term. Can take years to be effective. Fiscal and Supply side could be said to not be flexible enough to react to changes in economy whereas monetary can react within a month.

Policy conflicts It would be nice but unlikely for a government to achieve all of its objectives all of the time. Trade off need to occur in order that policies are not working against each other and cancelling each other out. Therefore it is up the government to set the priorities for what its policy.

Take notes and complete chart on page 84.

Phillips Curve

The PC demonstrates that demand based policy’s would not work in the long run. As soon as you get one issue fixed it causes another problem. Remember the analogy of balancing plates. Through the supply side policy we can affect the economy more positively. Non Accelerated Inflation Rate Unemployment

New Phillips Curve