price stability & supply side policy

Question 1

state what is meant by “demand pull inflation”. (2 marks)

Answer 1

demand pull inflation is when the total demand rises faster than the total supply.

Question 2

state what is meant by “cost-push inflation” . (2 marks)

Answer 2

cost-push inflation is a rise in the costs of production which leads to a rise in the general price level.

Question 3

state the 2 types of inflation. (2 marks)

Answer 3

cost-push

demand-pull

Question 4

state what price stability is. (2 marks)

Answer 4

price stability is when the price is fairly constant over time.

Question 5

state what inflation is. (2 marks)

Answer 5

when the general price level increases over time.

Question 6

state 2 costs of inflation for consumers. (2 marks)

Answer 6

• loss of consumer confidence

- fall in real incomes

Question 7

state 2 consequences of inflation for producers. (2 marks)

Answer 7

• increased production costs

- lower exports

Question 8

state 2 costs of supply side policies..(2 marks)

Answer 8

• lower standards of living

- increased inequality

Question 9

state 2 benefits of supply side policies. (2 marks)

Answer 9

• targets specific markets

- reduced inflation