Worksheetsessay- the policies needed to fight inflation
Total questions: 20
Worksheet time: 10mins
Name
Class
Date
1.
inflation is defined as
a)
high price levels in an economy that cn cripple and crush economic growth like in Zimbabwe or Venezuela
b)
when prices of everything increase faster than the wage level and GDP causing a conflict between objectives
c)
a sustained increase in the general levels of prices in an economy
d)
the price increases measured by the PPP which measures price, productivity and profitability - the key drivers of an economy
2.
Inflation tends to occur
a)
during a recession because firms make big profits while pushing wages to low levels and their spending can push up prices over time
b)
during the intermediate stage of the AS curve when prices reach around 3% and unemployment is low
c)
when the economy reaches the limits of its PPC and factors of production or have increased cost of production usually in a boom
d)
when there are too many good for the money and so people have to compete to get what they want
3.
the most common type of inflation is
a)
demand pull where the AD is less than AS and so prices are pulled down to meet consumer demand
b)
demand pull where optimism is high, world demand for exports is high and AD is greater than AS
c)
demand pull where the demand for labour pushes up the cost of production and creates inflationary pressure
d)
demand pull inflation where overseas people are repaired to pay more for australian exports because they are in such high demand - like the mining boom
4.
this is usually a result of
a)
high OS demand for X , major I spending and high levels of consumer and business confidence leading to speculation
b)
the government increasing the cost of production and borrowing to stop consumers and business creating an inflationary spiral
c)
the AS and LAS curve shifting left and this causes aggregate demand to decrease
d)
external forces that are beyond the control of a government like the GFc or wars
5.
another common type of inflation is cost push inflation which is caused by
a)
higher inflation rates in other countries so it is passed on
b)
increased costs of production which shift the AS curve to the right
c)
increased cost of production which shift the SAS to the left
d)
when export prices push up domestic prices because they are dearer than in the domestic economy
6.
the impacts of cost push inflation are
a)
higher prices and increased economic growth
b)
higher prices and decreased structural unemployment
c)
higher prices and increased cyclical unemployment
d)
higher price s and full employment
7.
in two speed economies there is a risk of
a)
cost push inflation
b)
supply side inflation
c)
demand pull inflation
d)
stagflation
8.
this can be caused when
a)
some parts of the economy are thriving like the mining boom and other parts suffer with inflation
b)
long term unemployment and hyperinflation combine to create difficult economic conditions the government can't fix
c)
external shocks like war cause imports to replace domestic production and cause unemployment
d)
some parts of the economy have strong economic growth while other sectors struggle with stagnant growth
9.
the success of this policy is generally
a)
effective if the level of inflation is not too high and government is prepared to risk political backlash
b)
only possible if supply side policy to deal with the frictional and seasonal UE is combined
c)
only when applied by liberal governments who have price stability as a high priority
d)
determined by external forces who will determine how effective any policy will be
10.
the purpose of this policy is to
a)
reduce the level of AD and to make people spend less
b)
decrease the AD curve and the level of C, I and inflation
c)
to make borrowing more expensive so people stop spending
d)
to reduce imports so domestic producers have less competition
11.
the main policy for stopping demand side inflation is
a)
increasing taxes and spending and running a budget deficit
b)
increasing taxes and decreasing G spending and running a budget surplus
c)
selling government securities to decrease money supply and increase interest rates
d)
using education and subsidies to reduce the demand for demerit goods and providing more merit goods
12.
the policy aims to
a)
encourage savings and to delay consumer spending and business Investment , shifting AS right
b)
make money more expensive so overseas exports will be cheaper in other countries due to the depreciation
c)
encourage savings and to delay consumer spending and business Investment , shifting AD left
d)
increase the confidence in th economy because the higher rates show a strong er economy and will help appreciate the currency
13.
demand side policy such as contractionary monetary policy can also be used to fight demand pull inflation by
a)
the RBA increases the cash rate and buys government securities and issues them at a low cash rate
b)
The government increases the interest rate to stop business and consumers spending and investing
c)
imports are reduced to help make domestic forms more competitive and so they don't need to increase their prices
d)
The RBA increases the cash rate , sells gov securities to reduce the money supply and ensure inflation stays between 2-3%
14.
some economists claim that the problem of using fiscal policy in solving demand pull inflation is it effectiveness is limited by
a)
low consumer expectations and political intransigence in not acting until it is too late
b)
political factors such as the reluctance to increase taxes, consumer and business expectations that they spend to escape future price increases
c)
external factors that make fiscal policy conflict with external balance and social equity
d)
the implementation and impact lags that are unpredictable and often reflect higher cost structures due to inefficiency
15.
demand side policies are often considered best
a)
for fighting recession and are an example of neo classical economic thinking
b)
for fighting credit crashes and are an example of monetarist economic thinking
c)
for helping economies escape recessions using keynesian economic thinking
d)
for achieving economic growth and full employment
16.
demand side policy does not help with cost push and stagflation because
a)
the policy conflict with the objectives
b)
increasing taxes will help control the inflation but will potentially make the UE worse
c)
because monetary and fiscal policy are not defined to work together , they only deal with one thing at a time
d)
because it is a conflict best shown on a Lorenze curve
17.
due to the problems of demand side policy , the use of supply side policies have been used to fight both types of inflation more successfully by
a)
shifting the SAS to the left
b)
shifting AD to the right
c)
shifting SAS and LAS to the right
d)
shifting LAS to the right
18.
the objective of supply side policy
a)
is to make the whole economy better and have cheaper prices
b)
is to target major sectors of the economy and increase efficiency, competition and output
c)
is to increase AD and create a multiplier effect that boosts economic growth
d)
is to increase supply by allowing more imports into the economy
19.
examples of supply side policies include
a)
privatisation , free trade and progressive taxes
b)
increased welfare payments , lower taxes and greater education
c)
industrial reform, corporatization , free trade and deregulation
d)
lower taxes, subsidies, tariffs and quotas to increase consumer confidence
20.
what is missing from this essay
a)
relevant labelled economic diagrams
b)
literary prose that makes it more exciting to read
c)
longer sentences that have more information in it to impress examiners
d)
dates and quotes from important economic figures and theorists
100 %
