(a)[2]
The information says that some thought the impact of oil price rises would be deflationary. Explain what economists mean by ‘deflationary’.
(b)
Refer to what actually happened to the UK inflation rate as shown in Table 1:
- Explain which, if any, of the 1970s points could have led to the pattern shown in Table 1. [4]
- In the 1970s the UK government followed a macroeconomic policy of increasing the budget deficit. Explain how this policy might have contributed to what is shown in Table 1. [6]
(c)[8]
Using the information provided, consider whether the effect of the rise in oil prices in 2011 was more likely, or less likely, to be inflationary than it was in the 1970s.