Macroeconomic Objectives - Inflation and Unemployment

What does inflation mean? The rise in price of half of the basket of CPI goods The rate at which prices rise, a general and continuing rise in prices The increase in government spending An increase in the base rate What does deflation mean? A period where the level of aggregate demand is falling. The value of money becomes greater. An increase in aggregate demand in the economy A sustained improvement in the balance of payments A fiscal deficit What is aggregate demand? Total demand in the economy minus the number of cats that are kept as dometic pets. Total demand in the economy including the balance of payments, deflationary spiral, expansionary fiscal policy and public ownership of yak farms. Total demand in the economy including consumption, investment, government expenditure and exports minus imports Total supply in the economy including aggregate demand, supply of labour and microeconomics What is the consumer price index (CPI)? A measure of the general price level (excluding housing costs) A measure of the general price level, which include how many jumping jacks you can do and council tax A measure of the general price level, including government debt minus the number of imported frog legs from China. A measure of the general price level, including unemployment data for worm farmers. Consumer Price Index (CPI) The consumer price index (CPI) is a common measure of price changes used in the European Union. It looks at the price changes of 700 goods and is recorded monthly. The average price change is calculated and then converted into an index number. Those figures are then compared with previous month to calculate the percentage change in prices (i.e. the inflation rate). High and fluctuating inflation is likely to be damaging to businesses. Type of Inflation Sort the following characteristics into their correct groups: Demand-pull inflation (4) Inflation caused by too much XXX in the economy relative to supply Rising consumer or government spending Rising need for resources by firms Increase in exports Cost-push inflation (4) Inflation caused by rising business XXX Increase in commodity prices Employees demanding higher pay Increases in taxation What are interest rates? The value of debt relative to GDP The price paid to lenders for borrowed money; it is the price of money The difference between the balance of trade and the balance of payments The result of a fiscal surplus Monetarists are economists who believe there is a strong link between growth in the money supply and inflation. True or false? The answer isn't false. True False Relationship between inflation and interest rates Mix and match the statements with their logical effect: Low interest rates lead to cheaper borrowing... ...so, households, firms and the government all borrow money. So, households, firms and the government all borrow money... ...this adds to the money supply and creates more demand, thereby raising prices. Which of the following form part of the International Labour Organisation's measures of unemployment? (5) Someone who is about to hand in their resignation Someone who is without a job Someone who has been promoted Someone who wants to get a job Someone who has actively sought work in the last week Someone who has actively sought work in the last four weeks Someone who is available to start work immediately Someone who is available to start work in the next two weeks Someone who has actually found a job but will be starting in the next two weeks Someone who has had a disagreement with their boss Types of unemployment Match each type of unemployment with its correct pair: Cyclical...Happens when things go wrong with the economy. unemployment that occurs during a downturn Structural unemployment that occurs as industries change Seasonal unemployment that occurs at certain times of the year Voluntary unemployment that occurs when people choose not to work Frictional (when people are between jobs) unemployment that occurs when people are between jobs (up to 8 weeks) Unemployment and Inflation Wordsearch To mark a word click its first letter then click its last. UNEMPLOYMENT STRUCTURAL VOLUNTARY DEFLATION INFLATION TAXATION SEASONAL POVERTY OUTPUT