inflation

Question 1

impact of high inflation on macroeconomic objectives

Answer 1

exports are less competitive so worsens current acc deficit
bad for envi as ad increased
smaller national debt
rising unemployment
depends on cause and magnitude
policy responses eg IR raised

Question 2

factors changing inflation

Answer 2

fall in oil and commodity prices but they’re volatile
XR change - rise increases savings and low confidence
fiscal policy

Question 3

should mpc be concerned about deflation

Answer 3

deflationary spirals eg Japan - fall in price level and productivity and wages decrease decreasing demand
low consumer confidence and expectations
only st -
if its supply side no worries
may benefit economy as increase AS as decreased COP

Question 4

IS LOW inflation desirable

Answer 4

increased exports
decreased import
more competitive
high real wages increasing spending
increases real debt burden
expect even lower prices so delays spending

Question 5

benefits of low and stable inflation

Answer 5

higher confidence encourages fdi
avoids risks of deflation
it means ad is lacking so risk of deflation and high unemployment
reduces inequality and risks of hyper inflation

Question 6

causes of inflation

Answer 6

high demand
cost push where costs rising
weak XR

Question 7

cpi

Answer 7

710 gs
20000 shops
food survey
price survey
weighted
index