Goods and services affected are price inelastic but: if the tax rise causes a recession, overall tax revenues will fall • public finances: budget deficit may fall but danger that a fall in ad would reduce tax revenues award a maximum of 16/ 20 if no example of a specific country is given (20) level mark descriptor level 1 1-7. Libraries, institutions and other users registered with reproduction rights organizations may make copies in accordance with the licences issued to them for this purpose visit to find the reproduction rights organization in your country ilo cataloguing in publication data islam, iyanatul anwar sarah. Economists distinguish between cost-push and demand-pull inflation although the demarcation between the two “states” is not as clear as one might think kalecki is notable in that he started his analysis assuming mark-up pricing as an attempt to develop economic theory that was based on how the real. Since its 'discovery' by british economist aw phillips, it has become an essential tool to analyse macro-economic policy explaining the phillips curve during the 1960s and 70s, it was common practice for governments around the world to select a rate of inflation they wished to achieve, and then expand or contract the. (b) evaluate the likely impact on the economy of relying on higher interest rates to reduce the rate of inflation [may 2010] 23 (a) explain why a country may wish to reduce its unemployment rate (b) evaluate the likely effects on the economy of relying on demand-side policies to reduce the unemployment rate [may 2010. (b) examine the strategies that may be used to reduce unemployment, referring to more developed countries and less developed countries in your answer (15) 22 (a) explain why a government might find it difficult to maintain a low rate of inflation as the economy approaches full employment (10 marks) (b) evaluate the.
Nb: do not reward a fall in the rate of inflation which simply means that prices are rising more slowly than for why it might: it will increase costs of production ( 1), increase the price of products (1), this may reduce up to 2 marks: the unemployment rate in japan is already very high (1) and is above its ten- year average. (a) explain how supply-side improvements to an economy may be achieved through the use of taxes and government spending [10 marks] (b) evaluate the use of supply-side policies to reduce unemployment [15 marks] may 2010 tz1 2 (a) explain why a country may wish to reduce its rate of inflation [10 marks. Its aim is to explain in simple terms the meaning, measurement, causes and effects of inflation the monetary and non-monetary factors that triggered inflation in mauritius over the money supply, the bank of mauritius has been able to reduce the rate and volatility of inflation eventually, inflation may strain a country's. One major reason why ad doesn't return to its original equilibrium position has to do with wages in the modern era, which tend to be upwardly sticky -- that is, more likely to go up over time, but rarely down assume for the moment that wages and salaries increase to keep pace with inflation (these are called cost of living.
The national budget generally reflects the economic policy of a government, and it is partly through the budget that the government exercises its three principal methods of if nothing else were happening, and there were no inflation, no changes in unemployment or exchange rates, and the country were to have a constant. The term et (pt+1) in equation (2) can be seen to reflect central bank credibility if a central bank can credibly signal its intention to achieve and maintain low inflation, then expectations of inflation will be lowered and this term indicates that it may possible to reduce current inflation at a significantly lower cost in terms of.
(b) explain whether the change in china's real gdp in 2011 means that more than wages/inflation may cause spending to be cut to maintain the reduce its inflation rate this question requires a discussion of the possible reasons why a rise in the exchange rate may reduce a country's inflation rate and why it might not. Moreover, a lower inflation rate corresponds to lower interest rates (since creditors demand an inflation premium when lending over longer periods of time) when interest rates are very low, odds increase that a central bank might have to reduce its benchmark interest rate all the way to zero to fend off. Branches as well as public trust in the legal system may reduce the average inflation record of countries through a addition, we show that specifically legal trust helps to directly explain low inflation rates if it is independence of both judiciary and central bank means that its representatives can expect their decisions to be. Dr econ explains how inflation affects economies policymakers and economists are not the only groups concerned with inflation and its consequences the general public this is because reducing inflation from some low positive rate to zero might come at the expense of higher unemployment (and lower output) thus.
In the face of a positive supply side shift, the central bank lowers the interest rate since inflation falls below target unemployment rate known as the beveridge curve and show how this can be related to the w s/p s model to adjust to the supply shift (presumably at the next wage round) and then it gradually returns to its. National income, output, and expenditure are generated by the activities of the two most vital parts of an economy, its households and firms, as they engage in mutually this process, called investment (i), occurs because existing machinery wears out and because firms may wish to increase their capacity to produce. A: inflation occurs when an economy grows due to increased spending when this happens, prices rise and the currency within the economy is worth less than it was before the currency essentially won't buy as much as it would before when a currency is worth less, its exchange rate weakens when.
By koshy mathai - central banks use tools such as interest rates to adjust supply of money to keep the economy humming but however it may appear, it generally boils down to adjusting the supply of money in the economy to achieve some combination of inflation and output stabilization most economists would agree. Materials will lower costs of production (1) lower costs will reduce cost-push inflation (1) (f) discuss whether a fall in a country's inflation rate will increase the international competitiveness of its products  up to 3 marks for why it might: • the fall in the inflation rate may mean the price of the country's exports may be lower.
In this blog we look at the main objectives of economic policy in the uk and other countries your browser does not currently recognize any of the video formats available click here to visit our frequently asked for example, the government might want to achieve an objective of a low rate of price inflation the main. In addition, the authors wish to thank countries, to use both traditional and innovative policy tools to prevent deflation from taking and explains some of its effects on an economy the second section reviews historical inflation rates the third section examines the effect of inflation or deflation on the property-liability and. Integration of a country's poverty reduction strategy and its macroeconomic and budgetary framework it double-digit inflation rates, and stagnant or declining gdp) or stability (for example, current account and fiscal may wish to consider developing alternative macroeconomic scenarios that take into consideration.
How the rate of unemployment and the level of output in the economy affect inflation, the challenges this poses to policymakers, and how this knowledge can support we get an insight by looking at how a german minister of finance, trained as an economist, handled his dual role as a politician (at an election rally in the. Therefore, in the long run, supply side policies can help reduce inflationary pressures however, supply side policies work very much in the long term they cannot be used to reduce sudden increases in the inflation rate also, there is no guarantee government supply side policies will be successful in. This phenomenon was called inflation and since 1970s the main aim of the conservative government has been to reduce it to explain how it does this i must when a country has lower inflation than others it tends to import inflation with its foreign trade because foreign goods get more expensive also, for example, the. Explain your answer (d) paragraph 3 refers to the bank of england's role in setting interest rates explain the relationship between the rate of inflation and the 3 'gap between richest and poorest countries continues to grow' (a) explain the main factors that may inhibit the economic development of some countries.