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By telepho ·
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Can low inflation conflict with other goovernment aims ? Why?

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Economics

by McKayTech In reply to Economics

No one else seems to be jumping on this one so I'll dive in and say "Yes, it can".

First of all, your question implies that there is some sort of consistency across governmental aims and senses of purposes. I don't see that - what I see is a boiling cauldron of diametrically opposed political interests against which the government tries to balance some general sense of direction.

Second, low inflation can become associated with low growth if it is not associated with gains in productivity. Low growth can lead to contraction of the economy with loss of employment and increases in a need for government benefits.

And, finally, a lot of the rationale behind maintaining a high debt level is that you get to pay off today's debt with tomorrow's inflated dollars. If the government's cost of capital is less than the rate of inflation, debt becomes less expensive.

regards!

paul

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Economics

by telepho In reply to Economics

I got the question in my Economics exam. And I wanted to compare my answer to yours.
Thanks

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