Saturday, April 12, 2008

Unit 3: Sources of cost push inflation

This chart from tutor2u shows the rising cost of imported raw materials and food into the UK,2,Slide 2

a) How might the depreciation of the £ have led to these rises?
b) Using an AD/AS diagram, explain how these rises may lead to cost push inflation
c) Assuming no change in AD, explain the consequences for the UK economy of a rise in inflation interms of the other macroeconomic objectives

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