Inflation, deflation, employment and unemployment Flashcards
What is demand pull inflation?
Where aggregate demand exceeds aggregate supply leading to an increase in the level of prices
What causes demand pull inflation? (5)
C I G X M
What is cost push inflation?
Where increased costs of production result in firms increasing their prices leading to an increase in the general price level
What causes cos push inflation? (3)
A rise in the cost of raw materials
Increase in wage levels
A rise in indirect taxes
What will cost push inflation lead to? Why?
Unemployment
Because there is a fall in real output
What is a tight labour market?
Where firms have to increases wages to attract the labour that they require
What are the demand-side causes of unemployment? (2)
Cyclical
Demand-deficient
What is cyclical unemployment?
Demand deficient unemployment that occurs as a result of the economic cycle
What is demand deficient unemployment?
Insufficient AD in the economy to employ the available labour
What are the supply-side causes of unemployment? (3)
Frictional
Voluntary
Structural
What is frictional unemployment?
When people are between jobs
What is voluntary unemployment?
Workers who are not prepared to take a job at current wage levels
What is structural unemployment?
Unemployment resulting from changing patterns of demand in the labour market not matching the skills and locations of those seeking work
How will the government try to correct supply-side unemployment?
Training programmes
What are discouraged workers?
Workers who leave the labour market because despite the numerous attempts they are unable to find a job
