IB Economics Week 5

Here is the U6th week 5 revision ticklist for students and teachers alike.

Week 5: Inflation and Unemployment

Revision Ticklist. Do you know…

Unemployment

Difference between full employment and underemployment
How to calculate the unemployment rate
Costs of unemployment
Types of unemployment (structural, frictional, seasonal, cyclical and real wage)
Policies to deal with the different types of u/e

Inflation

Difference between inflation and deflation
Methods of measuring inflation (Higher level only)
Problems of measuring inflation (HL only)
Costs of inflation and deflation
Causes of inflation (cost push, demand pull and excess money growth (MV = PT))

The Phillips Curve (Higher Level only)

Natural rate of unemployment
Philips Curve (short run and long run)
Non-Accelerating Inflation rate of u/e (NAIRU)

Short Answers [10 marks]

1) What is the natural rate of unemployment?

2) What is structural unemployment, and what measures might governments take to cure it?

3) Use the Phillips curve to explain the natural rate of unemployment

4) What are the likely consequences of deflation for a country’s economy?

Essay Questions

1a) Explain the difference between demand and supply side policies [10]

b) Which of these policies is likely to be more effective? Justify your answer [15]

2a) Explain why a government might find it difficult to maintain a low rate of inflation as an economy approaches full employment [10]

b) Evaluate the proposition that the priority in economic management should be the maintenance of low unemployment [15]