IGCSE Economics Paper-2: Specimen Questions with Answers 30 - 31 of 100

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In developing countries, inflation is not purely a monetary phenomenon. Factors typically related to fiscal imbalances, driving higher money growth and exchange rate depreciation, dominate the inflation process in developing countries.

Question 30 (4 of 5 Based on Passage)

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What do you mean by inflation?

Explanation

  • Inflation is defined as the rise in the prices of goods and services of day to day use, like food, clothing, housing etc.
  • Inflation is the increase in the prices of goods and services of daily or common use, such as food, clothing, housing, recreation, transport, consumer staples, etc. Average Price change in various commodities and services are measured through inflation overtime. The opposite of inflation is known as deflation which refers to the fall in the price index of this basket of items. Inflation indicates the fall in the purchasing power of a person i.e.. fall in the unit of a country՚s currency. Inflation is measured in percentages. Central government authority measures inflation and oversees adopting measures to make sure the smooth functioning of the economy.

Question 31 (5 of 5 Based on Passage)

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Explain the reasons for unemployment.

Explanation

Employment is due to various reasons for both demand and supply side i.e.. employer and worker. Demand-side unemployment may be due to high rate of interest, recession, financial crisis. Whereas, the supply side unemployment is frictional or structural.

The Following Are the Reason for Unemployment

  • Increase in population causes higher unemployment rates because the number of people who are in search for a job increases. So, it becomes difficult to arrange jobs such huge numbers of workers.
  • Advancement of technology often leads to the unemployment of the low skilled or unskilled workers in various industries. New technology increases the speed and quality of production but it also increases the number of jobless people.
  • Lack of education or skills is a major reason for unemployment. It happens when the qualifications of a person do not match with job responsibilities.
  • Unemployment can be due to the rising cost. It is hard for the companies to pay salary to the employees or even the minimum wage when cost is high.

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