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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
Examples of goods that are excluded when calculating core inflation include:
- Frozen meat, vegetables, and fish
- Electricity
These goods are often considered volatile and can distort the actual inflation rate.
Step 2
3.1.2 How does air pollution affect the environment?
Answer
Air pollution adversely impacts the environment by contributing to global warming, depleting the ozone layer, and causing acid rain. These changes can lead to significant environmental damage, loss of biodiversity, and increased health risks for living organisms.
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 changes made by government or regulatory authorities, which control the prices of certain goods and services. This often includes necessities such as utilities or public transport, where prices are not solely determined by market forces.
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 debts with money that has a decreased purchasing power. This may enable them to negotiate better terms and pay off loans more easily compared to fixed income periods.
Step 7
3.2.5 How would an oversupply of money impact on the economy?
Answer
An oversupply of money can lead to increased demand-pull inflation, causing prices to rise overall. This often results in:
- An increased standard of living for consumers initially, but may backfire if inflation outpaces wage increases.
- A reduction in the real value of money, leading to decreased purchasing power over time.
- Depreciation of the currency affecting imports negatively.