Download Inflation - IGCSEBus

Inflation & balance
of payments
http://www.youtube.com/watch?v=
t_LWQQrpSc4
A positive
balance of
payments
Economic
growth
Government
objectives
Low
unemployment
Low
inflation
Inflation rates
Thailand
UK
Malaysia
Cambodia
Indonesia
3.4%
3.1%
2%
18.7%
Inflation
Living
standards fall
inflation
Businesses
are reluctant
to open /
expand
Employees
will be ‘paid
less’
People
spend less
(economic
slow-down)
Low Inflation
Living
standard
increases
Low inflation
Employees
will have
more
spending
power
Businesses
are quick to
open /
expand
People spend
more,
businesses
boom
Inflation
Thailand’s Inflation Rate
The inflation rate in Thailand was last reported at 3.40 percent in July of 2010. From 2000 until
2010, the average inflation rate in Thailand was 2.51 percent reaching an historical high of 9.20
percent in July of 2008 and a record low of -4.40 percent in July of 2009. Inflation rate refers to
a general rise in prices measured against a standard level of purchasing power. The most well
known measures of Inflation are the CPI which measures consumer prices, and the GDP
deflator, which measures inflation in the whole of the domestic economy.
Inflation rates
“inflation” refers to a general
rise in prices measured
against a standard level of
purchasing power.
Inflation is measured by
comparing two sets of goods
at two points in time
Related concepts include:
Deflation - a general falling level of prices
Disinflation - the reduction of the rate of inflation
Hyper-inflation - an out-of-control inflationary spiral
Stagflation - a combination of inflation and poor economic growth
Reflation - An attempt to raise prices to counteract deflationary pressures.
Nurses case study
1 – cut down
2 – fold in half
3 – stick in neatly
4 – answer the following questions
•If a nurse gets paid £19,000 per annum, how much
more money is 2.75%? (show your working out)
•Explain what is meant when the article states that in
real terms, nurses are facing a pay cut.
5 – Q&A UK inflation measures
Economic growth
Thailand’s GDP = $272.43bn
Laos’s GDP = $5.4bn
Cambodia = $10.35bn
Malaysia = $221.77bn
India = $1.16trn
America’s GDP = $14.3trn
UK’s GDP = $2.67trn
unemployment
Unemployed people do not contribute towards the
economy, but actually cost the economy money
The lower the unemployment the better.
UK August = 7.8%.
Thailand August = 1.4%
Balance of payments
Imports
฿20
฿80
Exports
฿10
฿120
Deficit = ฿10
Surplus = ฿40
Balance of payments
Thailand
$3bn surplus (2001)
UK
$25bn deficit
India
$1.1bn surplus
America
Cambodia
Malaysia
Indonesia
Homework
7 (a) Analyse the benefits to your country’s economy
from a multinational manufacturer of computers locating
a new factory there.
LO
Explain how government intervention such as:
•Fiscal policies
•Monetary policies
can influence the economy.
Government intervention
Most countries have a mixed market economy.
The government will have some influence on the
performance of the economy.
Fiscal policy
Monetary policy
Interest rates
Spending &
taxation
2 minute discussion
Discuss with the person next to you, what effect your
‘card’ would have on the economy.
End
1.1 Starting a Business Enterprise
The economic cycle
Fiscal
policy
Increase
in GDP
Increase
in
inflation
Decrease
in GDP
Economy
slows
down
Monetary
policy
Economic cycle
Now complete the economic cycle, using these
boxes to help you.
Increase
in GDP
People
spend
less
Reduce
taxes
Decrease
in GDP
Increase
public
spending
Unemplo
yment at
its
highest
Increase
in
inflation
Increase
interest
rates
Business
make
less sales
Increase
unemployment
Business
reluctant
to
expand /
open
Homework
Complete inflation work sheet, answering all 4
questions.
What have we learnt?
Discuss with a
partner before you
share it with the class