A-Level Economics Model Answers
Explain how rises in inflation can become embedded in an economy.
Here is a question and answer from the national economy section of the A-level Economics syllabus.
This question is an ‘explain’ question - the type of question where students have to write an extended answer by explaining the reasons for each of their points.
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Explain how rises in inflation can become embedded in an economy.
MODEL ANSWER GUIDE
Possible definitions
Inflation
Answer layout
Outline the relationship between unemployment and inflation using the Short-Run Phillips Curve diagram
Use a chain of reasoning (perhaps with an example) to explain why unemployment and inflation are inversely correlated in the short run
Explain the limitations of the Short-Run Philips Curve (SRPC) diagram
Explain the idea of inflation expectations
Explain the idea of the natural rate of unemployment, or the non-accelerating inflation rate of unemployment (NAIRU)
Explain what happens when unemployment is reduced below the natural rate
How can inflation expectations result in a wage-price spiral?
How can this lead to inflation being embedded?
What does this mean about the relationship between unemployment and inflation in the long-run?
Possible diagrams
Phillips Curve
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