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The term 'Goldilocks economy' was recently seen in the news. It best describes which of the following scenarios in the economy?
- a)It is a highly inflationary state, wherein the prices of commodities rises up exponentially.
- b)It is a state wherein, the economy is not expanding or contracting by a large margin.
- c)It is a state of economy where there is growth and employment opportunities.
- d)It is a state of economy wherein there is high foreign investment pull-out.
Correct answer is option 'B'. Can you explain this answer?
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The term Goldilocks economy was recently seen in the news. It best des...
Explanation:
Goldilocks Economy:
A Goldilocks economy is a state where the economy is not expanding or contracting by a large margin. It is characterized by moderate economic growth, low inflation, and a low unemployment rate. This term comes from the fairy tale "Goldilocks and the Three Bears," where Goldilocks finds the perfect porridge, chair, and bed - not too hot, not too cold, but just right.
Characteristics of a Goldilocks Economy:
- Moderate Economic Growth: The economy is growing steadily but not too quickly to cause inflation or asset bubbles.
- Low Inflation: Prices of goods and services are stable, leading to a stable purchasing power for consumers.
- Low Unemployment Rate: There are ample job opportunities for people, leading to low levels of unemployment.
Benefits of a Goldilocks Economy:
- Stability: A Goldilocks economy provides stability to businesses, consumers, and investors, reducing uncertainty and promoting confidence.
- Healthy Balance: It strikes a balance between growth and inflation, ensuring sustainable economic development.
- Opportunities: The economy offers opportunities for growth and investment without the risk of overheating.
Conclusion:
In conclusion, a Goldilocks economy is a desirable state for policymakers as it signifies a healthy and balanced economy. It is crucial to maintain such an equilibrium to ensure long-term prosperity and sustainability in the economy.
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The term Goldilocks economy was recently seen in the news. It best des...
- Recent Context: In Monetary Policy Committee's (MPC) latest policy review the RBI decided to maintain the status quo. In other words, it changed nothing. This gave the economists to think whether India has reached its Goldilocks Scenario.
- What Is a Goldilocks Economy?
- A Goldilocks economy is not too hot or too cold but just right ie. describing situations that are "just right" amid two extremes —to steal a line from the popular children's story Goldilocks and the Three Bears.
- The term describes an ideal state for an economic system. In this perfect state, there is full employment, economic stability, and stable growth. The economy is not expanding or contracting by a large margin. Hence statement (b) is the correct answer.
- A Goldilocks state is also ideal for investing because as companies grow and generate positive earnings growth, stocks perform well.
- Goldilocks economies are temporary in nature, as seen by the boom and bust cycles.
- Inflation in Goldilocks Economy:
- A Goldilocks economy has steady economic growth, preventing a recession, but not so much growth that inflation rises by too much.
- The inflation in such a scenario will neither be too hot (implying high inflation) nor too cold (referring to faltering GDP growth).
- It implies idle inflation i.e. not too low nor too high.
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The term Goldilocks economy was recently seen in the news. It best describes which of the following scenarios in the economy?a)It is a highly inflationary state, wherein the prices of commodities rises up exponentially.b)It is a state wherein, the economy is not expanding or contracting by a large margin.c)It is a state of economy where there is growth and employment opportunities.d)It is a state of economy wherein there is high foreign investment pull-out.Correct answer is option 'B'. Can you explain this answer?
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