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3.1 Answer the following questions - NSC Economics - Question 3 - 2023 - Paper 2
Question 3
3.1 Answer the following questions. 3.1.1 Give any TWO examples of goods that are excluded when calculating core inflation. 3.1.2 How does air pollution affect the... show full transcript
Worked Solution & Example Answer:3.1 Answer the following questions - NSC Economics - Question 3 - 2023 - Paper 2
Step 1
3.1.1 Give any TWO examples of goods that are excluded when calculating core inflation.
Answer
Two examples of goods that are excluded when calculating core inflation are:
- Fresh meat, fish, fruit, and vegetables - These items are volatile and can be subject to seasonal fluctuations.
- Electricity - This is often excluded due to its unpredictable nature regarding pricing changes.
Step 2
3.1.2 How does air pollution affect the environment?
Answer
Air pollution significantly impacts the environment by contributing to global warming. It can lead to the depletion of the ozone layer, which protects life from harmful UV rays. Additionally, it may cause environmental damage, biodiversity loss, and health risks for humans and wildlife.
Step 3
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Step 5
3.2.3 Briefly describe the term administered-price inflation.
Answer
Administered-price inflation refers to price increases that are controlled by the government or regulatory bodies rather than determined by the market forces of supply and demand. This often includes prices for utilities or services.
Step 6
3.2.4 Explain the benefit of a general price increase for debtors in the economy.
Answer
A general price increase can benefit debtors because it allows them to repay their debts with money that has less purchasing power. As prices rise, the real value of their debt decreases, making it easier to pay off.
Step 7
3.2.5 How would an oversupply of money impact on the economy?
Answer
An oversupply of money in an economy may lead to an increase in demand-pull inflation, resulting in higher prices for goods and services. This situation can decrease the purchasing power of money, negatively affecting the standard of living for consumers, and may depreciate the currency's value in global markets.