Theme 2 AO4

Question 1

Businesses will be negatively affected by inflation. Evaluate.

Answer 1

Businesses will charge higher prices to make up for their increased costs and they may be able to increase their profit margins.

Question 2

Consumers will be negatively affected by inflation. Evaluate.

Answer 2

During inflation periods, wages will also rise. If the increase in income is proportionate to the increase in inflation, consumers may stay unaffected

Question 3

Rising exports is positive for an economy as it will result in a trade surplus. Evaluate.

Answer 3

If it is a large trade surplus, the value of the domestic currency will increase. This means imports will become cheaper and exports will become more expensive for other countries.