Explain why the rapid growth and high inflation might often occur at the same time.

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4 The combination of rapid economic growth and inflation is no coincidence.
(a) Explain why the rapid growth and high inflation might often occur at the same time.
Explanation of meaning of economic growth and its effects on national income, consumer spending, government spending and firms’ investment, or foreign demand for exports which may have become cheaper. The effect on aggregate demand which will increase could cause inflation — especially if there is a pressure on resources.
Level Description Marks 4 Sound explanation with good application and a clear understanding of the principles involved. An explanation of economic growth should be given and a comment on the possibility of inflation. 9-12 3 Accurate explanation but with a more limited development and comment on the possibility of inflation. 7-8 2 Weaker explanation, briefly sketched, with no real connection to inflation. 5-6 1 Answer has some basic correct facts but indudes irrelevancies and errors of theory. 1-4 0 No creditable response. 0
(b) Assess what policies might be used by a government to control inflation without harming economic growth [13]
Analysis of fiscal and monetary policies which might be used together with a comment on their effectiveness.
Level Description Marks 4 Reasoned and clear discussion with the analysis logically presented and a conclusion drawn. 9-13 3 Fair but undeveloped discussion possibly concentrating on limited range of policies but still with a conclusion. 7-8 2 A more descriptive account with little evaluation and no conclusion. 5-6 1 Answer has some basic correct facts but includes irrelevancies and errors of theory. 1-4 0 No creditable response.

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