3.1.1 Name any TWO ways of measuring inflation - NSC Economics - Question 3 - 2023 - Paper 2
Question 3
3.1.1 Name any TWO ways of measuring inflation.
3.1.2 How does tourism positively contribute to the gross domestic product (GDP)?
3.2 Study the information below... show full transcript
Worked Solution & Example Answer:3.1.1 Name any TWO ways of measuring inflation - NSC Economics - Question 3 - 2023 - Paper 2
Step 1
Name any TWO ways of measuring inflation.
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Answer
The Consumer Price Index (CPI)
The Producer Price Index (PPI)
Step 2
How does tourism positively contribute to the gross domestic product (GDP)?
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Tourism contributes directly to GDP through expenditures by residents and non-residents on leisure and accommodation. Additionally, it indirectly supports suppliers of goods and services that cater to tourists, thus promoting local business growth.
Step 3
Identify the month and year when the inflation rate was above the inflation target.
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Answer
July 2022
Step 4
Give ONE possible reason for an increase in the inflation rate in 2022.
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An increase in international oil prices which affects transport costs.
Step 5
Briefly describe the term core inflation.
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Core inflation refers to the rate of inflation excluding volatile items such as food and energy prices, providing a clearer picture of the underlying inflation trend.
Step 6
Explain the reason for the South African Reserve Bank to reduce interest rates when the inflation rate is below 3%.
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To stimulate aggregate demand, which can increase the level of economic activity by encouraging consumer spending and investments.
Step 7
How does inflation psychologically influence the various participants in the economy?
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It can decrease consumer confidence, leading to reduced spending and increased savings in inflation-linked instruments.
It may compel businesses to raise prices to protect profit margins, while labor unions may demand higher wages to offset the erosion of purchasing power.
