In 2008, Zimbabwe hit a peak inflation rate of 500 trillion per cent. By 2015, inflation had dropped so far that deflation was being discussed. Such deflation could be very serious because unemployment in the country was high. Raising government spending on training is one policy option that may be used to bring down both unemployment and inflation.
(a)[2]
Identify two different ways in which a high unemployment rate may influence firms.
(b)[4]
Explain two causes of deflation.
(c)[6]
Analyse the drawbacks of a very high rate of inflation.
(d)[8]
Discuss whether higher government spending on training will always lower inflation.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Weak demand cuts revenue/prices” …