inflation
Difficulty Levels:
1
CHOICE
Basic
When would an increase in aggregate demand be least likely to result in inflation in an economy？( )
Answer:
C
Explanation:
No detailed explanation
2
CHOICE
Basic
Who is most likely to benefit during a period of inflation？( )
Answer:
B
Explanation:
No detailed explanation
3
CHOICE
Basic
What is most likely to cause a fall in the rate of inflation？( )
Answer:
C
Explanation:
No detailed explanation
4
CHOICE
Basic
A worker earns $$\$ 250 $$ each week, which leaves a disposable income of \$ $$ 175 $$
What will affect the real value of the worker's $$\$ 250$$ earned income？( )
Answer:
C
Explanation:
No detailed explanation
5
Q&A
Basic
Discuss whether a government should aim for an unemployment rate as low as $$0.5 \%$$．
Answer:
Up to 5 marks for why it should：
- result in high output/GDP（1）high incomes/high living standards（1）；
- lead to high government tax revenue（1）this could be spent on e．g．education/health care（1）；
- cause low government spending on unemployment benefits（1）reduce opportunity cost/allow tax revenue to be spent on other items（1）；
- full employment is one of the main aims of government policies（1）．
Up to 5 marks for why it should not：
- $$0.5 \%$$ is usually regarded as being below full employment/difficult to achieve（1）always likely to be some frictional unemployment（1）；
- at $$0.5 \%$$ unemployment，the level of demand is likely to be high（1）economy operating at full capacity（1）may cause inflation（1）demand-pull inflation（1）may also drive up wages due to a shortage of labour（1）cost-push inflation（1）；
- higher level of demand may increase demand for imports（1）causing a current account deficit（1）
Explanation:
No detailed explanation
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