Evaluate the likely microeconomic and macroeconomic effects of relatively high inflation rates in many African countries

Edexcel A-Level Economics Paper 3 June 2019 Insert

Evaluate the likely microeconomic and macroeconomic effects of relatively high inflation rates in many African countries. (25 marks)

Plan

• Paragraph 1
  • Argument: one microeconomic effect of high inflation can be an increase in costs due to a wage price spiral 
  • Diagram: increase in costs 
  • Evaluation: firms may also be able to increase their revenue if the inflation is associated with strong economic growth 
• Paragraph 2
  • Argument: one macroeconomic effect of high inflation is a fall in cost push inflation
  • Diagram: decrease in SRAS 
• Evaluation: high inflation can also cause imports to become cheaper which can actually increase SRAS but this depends on PED for imports 

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