ECONOMIC QUESTION. DRAW IT IF IT IS NEEDED. QUESTION 2 a. Government, businesses
ID: 1155177 • Letter: E
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ECONOMIC QUESTION.
DRAW IT IF IT IS NEEDED.
QUESTION 2 a. Government, businesses and unions make decisions based on the forecasted rate of inflation. Use appropriate terminologies to explain how workers and lenders will be impacted if the forecasted rate of inflation was below the actual rate of inflation. 3 Marks a. Reflect on two issues you would have considered before making your mind to purchase a good that has increased in price. 2 Mark a. Assume the latest unemployment report stated that the economy created 50000 new jobs and the unemployment rate has increased by 0.2 percent. Is there an error in the report? Explain. 2 MarksExplanation / Answer
Answer a) lenders will be losers, bcoz inflation erodes the value of money , thus when forcasted inflation is below the actual one then the inflation rate realized is higher than what was expected.
Thus the workers will repay the loan with reduced value of money, & thus the borrowers will be gainers as they return money with relatively lower worth compared to when they had borrowed money.
B) two issues
1) the margin by which the price has increased
2) the value or worth of the good whose price has increased
C) no there is no error in report
It might have been the case that the new jobs created are more skilled , & thus thses new jobs voulc have replaced the unskilled workers , thus they get unemployed.
& Result is increase in unemployment though new jobs have been created
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