WJEC A-Level Economics Evaluating Economic Models and Policies (A2 Unit 4) overview quiz quiz

there is a trade-off, with lower unemployment associated with higher inflation

inflation and unemployment always rise together

inflation has no relationship with unemployment

unemployment can be reduced to zero with no inflation

wages are perfectly flexible only in the short run

rising inflation expectations shift the short-run curve up, returning unemployment to the natural rate

the government can always choose any level of unemployment it wishes

inflation is always zero in the long run

actual output is above potential output

the economy is growing faster than its trend rate

actual output is below potential output, indicating spare capacity

inflation is accelerating rapidly

expansionary monetary policy alone

raising aggregate demand through a fiscal stimulus

doing nothing, as it always self-corrects

supply-side policies such as retraining and improving labour mobility

rising costs of production shifting short-run aggregate supply left

excess aggregate demand near full capacity

a fall in the general price level

an increase in the productivity of the workforce

Deflation caused by rising aggregate supply from higher productivity

Deflation caused by falling aggregate demand, leading to delayed spending and rising real debt

Any fall in the rate of inflation while prices still rise

A one-off fall in a single good's price

Foreign direct investment inflows

Changes in the central bank's currency reserves

Trade in services (invisible trade)

Portfolio investment in shares

a depreciation of the currency

a rise in interest rates to cut domestic demand

a cut in government spending

an increase in income tax

remains even when the economy is at full capacity

arises from the economic cycle and self-corrects as the economy recovers

is caused only by deliberate tax cuts

can never be reduced

raising the bank rate sharply

cutting government spending

buying financial assets to raise their price, lower yields and inject liquidity

fixing the exchange rate

Banks always lend too little without regulation

Banks bear the full cost of their own risk-taking

Regulation guarantees banks a fixed profit

Banks may take excessive risk expecting a bailout, a market failure regulation can correct

health and education

inflation and unemployment

exports and imports

the budget deficit and the national debt

it never brings any capital or technology

profits may be repatriated and investment may form an enclave with few local linkages

it always reduces the host country's tax revenue

it is the same thing as foreign aid

switch from a higher-cost domestic producer to a lower-cost producer within the union

switch from a lower-cost producer outside the union to a higher-cost producer inside it

stop trading with all other countries entirely

adopt a single currency

higher transaction costs on internal trade

greater exchange-rate uncertainty within the union

the loss of an independent monetary policy and exchange rate

an automatic improvement in its terms of trade