High-technology (hi-tech) firms rely on a mix of resources, including labour and land. A hi-tech firm in the US has developed a new price index that it says gives a more accurate reading than the Consumer Prices Index (CPI). Central banks seek the most accurate inflation measure because inflation affects many groups, such as savers and borrowers, as well as a country’s level of investment.
(a)[2]
Identify the reward to labour and the reward to enterprise.
(b)[4]
Explain how inflation can affect borrowers and savers.
(c)[6]
Analyse why accurate inflation measurement matters to government.
(d)[8]
Discuss whether an increase in investment would or would not reduce a deficit on the current account of the balance of payments.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Labour is paid wages” …