Other Stuff

Question 1

What is the Philips Curve

Answer 1

Plots inflation against unemployment

Question 2

What goes on which axis on the Philips curve

Answer 2

Y - Inflation
X - Unemployment

Question 3

When was the Philips curve criticised

Answer 3

When stagflation occurred and both inflation and unemployment increased

Question 4

What is the clash between Monetarists and Keynesian’s

Answer 4

Monetarist argue that unemployment is a supply side phenomenon and demand side policy cause only temporary effect
Keynesians argue that demand deficient unemployment happens during a recession so demand side policy can cause LR reduced unemployment

Question 5

What is Y

Answer 5

Actual output

Question 6

What is Yf

Answer 6

Potential output

Question 7

How do you calculate the output gap

Answer 7

Y-Yf

Question 8

How do you remember Fiscal policy

Answer 8

Fizzy G&T
Fiscal policy is gov spending and taxation

Question 9

What is demand pull inflation

Answer 9

AD is rising with full employment capacity causes pressure to increase price levels

Question 10

When does Demand pull inflation occur

Answer 10

Consumer spending is rising excessively
Firms increase their spending substantially (in response perhaps to no.1)
Government increases spending or cuts taxes
World demand for UK exports rises due to world economy boom
(Factors of AD)

Question 11

What is cost push inflation

Answer 11

Increased supply side costs push up prices in order for firms to remain profitable

Question 12

What causes cost push inflation

Answer 12

Wages and salaries
Increased import prices
Raising taxes (indirect taxes)
Inelastic demand to increase profit

Question 13

How do you show demand pull inflation on a graph

Answer 13

AD shift right

Question 14

How do you show cost push inflation on a graph

Answer 14

AS shifts left

Question 15

What is income

Answer 15

Money received as payment for work

Question 16

What is national income

Answer 16

Total spending on goods and services

Question 17

Consequences of lower income (AD)

Answer 17

Less consumption
So confidence falls
So C as a component of AD falls

Question 18

Consequences of lower income (multiplier)

Answer 18

Negative multiplier effect
More saving and less spending

Question 19

Evaluation about lower wages

Answer 19

It’s better having lower wages than being unemployed

Question 20

2 major causes of disinflation

Answer 20

Falling costs
Less growth
(AD lower)

Question 21

Good evaluation points for concern about deflation

Answer 21

X is specific to one industry
X is supply side, not demand side
X is short term
X it means commodities are cheaper so AS will shift right in the LR

Question 22

What is the problem wiht the MPC

Answer 22

They struggle to change AS factors

Question 23

What are the MPC willing to do

Answer 23

Use unorthodox tools like QE

Question 24

How effective was QE in the UK post 2011

Answer 24

Avoided deflation post crisis

Question 25

How have the MPC not been effective (IR)

Answer 25

IR have been low for ages and haven’t been working

Question 26

Problem with GDP in the modern world

Answer 26

Doesn’t take into account “free” things like YouTube and software updates that are all free to consumers

Question 27

Pros and cons of using mean

Answer 27

Takes every data point into account but is easily skewed

Question 28

Detailed description of how inflation is calculated

Answer 28

From a base year Family expenditure survey to figure out which items should be in the representative basket Then each item is weighted based on its price

Question 29

Why is CPI not fully representative

Answer 29

It doesn’t take into account non-typical households

Question 30

What is transitory inflation

Answer 30

Temporary increase in consumer prices but expected E.g. 2nd hand car prices in the UK in Covid