Causes of inflation
Definition of inflation
A general and continued rise in price.
Definition of disinflation
A fall in the rate of inflation.
Definition of unemployment
Individuals are without a job but who are actively seeking work.
Definition of under-employment
Those who would work more hours if available or are in jobs that are below their skill level.
Definition of deflation
A fall in the price level.
Inflation is measured by _
A. Consumer price index
B. Wholesale price index
C. Marshall's index
D. None of the above
A. Consumer price index
A result of deflation
A. A rise in the value of money
B. A rise in savings
С. A rise in employment
D. Worsen balance of payment
D. Worsen balance of payment
The increase in online banking has led to a reduction in the demand for counter staff in high street bank branches.
This type of unemployment is
A. Cyclical
B. Frictional
C. Seasonal
D. Structural
D Structural
Which of the following is not a factor causing inflation?
A. Increase in oil prices
B. Fall in raw materials
C. Rise in labor wages
D. Increase demand
B. Fall in raw materials
Which one of the following types of unemployment is most likely to be caused by a technological change in an industry?
A. Cyclical
B. Real wage
C. Seasonal
D. Structural
D. Structural
In October 2019 the annual rate of inflation in the UK was 1.5%, as measured by the Consumer Prices Index (CPI), and 2.1%, as measured by the Retail Prices Index (RPI).
Explain one likely cause of inflation.
Explain how the change in the exchange rate of the pound has 'contributed to rising inflation' in UK.
Imports relatively more expensive → leading to (cost push) inflation
／Exports are relatively cheaper → leading to (demand pull) inflation
UK has increased its number of automatic robots in its factories. Explain one likely reason for the increase in the number of people unemployed in the UK.
Structural unemployment/ technological unemployment
Explain one likely economic effect of the fall in the UK unemployment rate.
Increased tax revenue/ lower welfare payments/ Increase in disposable income/ Less potential output will be lost/ Increase in consumption/AD/GDP
Name one causes of deflation.
Oil prices falls/ increase employment/ raw materials prices fall…
Any other acceptable answers.
The excess demand puts upward pressure on prices across a broad range of goods and services and ultimately leads to an increase in inflation.
Draw the reason of the inflation on a AD-AS diagram.
Shift AD to the right.
CPI:
2013: 126.8; 2014: 128.4; 2015: 128.2
Calculate the percentage change in the UK Consumer Prices Index from 2014 to 2015.
-0.15%
There is a cyclical unemployment in UK.
Draw the causes of unemployment on a AD-AS diagram.
Shift AD to the left.
State the formula of unemployment rate.
Unemployment rate/ total workforce
The country of Snowdonia has a total adult population of 10 million, and of these 210 thousand are currently out of work and actively searching for new employment. A further 2.9 million are not working because they are retired, institutionalized, or simply choose not to work (i.e. homemakers and full-time students). Finally a total of 100 thousand citizens are currently enlisted with the Snowdonian military.
Assuming the Snowdonian ministry of statistics uses the same unemployment formula as the U.S. Bureau of the Census, what is Snowdonia’s current unemployment rate?
3%
The increase in oil prices has caused a cost-push inflation.
True or False
True
UK is now facing an inflation of 2%, causing a fall in purchasing power.
Name one evaluation.
- Magnitude/ Time lag
Any other appropriate answers.
Name an example of industry facing the following types of unemployment. One example for each type.
Technological unemployment:
Seasonal unemployment:
Geographical unemployment:
Any acceptable answer.
UK is facing a recession in 2021, causing a great increase in unemployment rate in UK.
Name one evaluation.
- Magnitude/ Time lag
Any other appropriate answers.
Name 3 common evaluation.
Any three:
- Time lag
- Magnitude
- Quality
- Quantity
- Effectiveness