effects of inflation (2)

Question 1

evaluate the macroeconomic effects of rising inflation rates in a particular economy e.g. the UK (KAA1 -> economic growth + BOP)

Answer 1

INFLATION WILL LIMIT GROWTH + WORSEN BOP
- define inflation (sustained increase in the price level for most goods + services overtime) -> e.g. inflation surged to 11.1% post-COVID-19 -> erodes purchasing power for consumers -> real incomes fall (esp if wages do not keep face) -> fall in consumption -> 60% of AD in UK -> fall in real GDP -> limited economic growth
- creates uncertainty for businesses -> firms find it hard to predict future costs/prices -> less investment -> 15% of AD -> less accumulation of capital -> slowdown LRAS
- increased prices for UK exports -> reduced price competitiveness -> simultaneously, domestic consumers switch to cheaper imports -> more import spending -> worsens current account deficit

Question 2

counterargument: evaluate the macroeconomic effects of rising inflation rates in a particular economy e.g. the UK (EVAL1 ->

Question 3

evaluate the macroeconomic effects of rising inflation rates in a particular economy e.g. the UK (KAA2 ->

Question 4

evaluate the macroeconomic effects of rising inflation rates in a particular economy e.g. the UK (EVAL2 ->

Question 5

judgement: evaluate the macroeconomic effects of rising inflation rates in a particular economy e.g. the UK