How do Governments usually bring an inflationary process to a halt? Briefly explain how their strategies to deal with rising inflation could sometimes be counterproductive in the longer term.

Write about 50 -60 words per question. Referencing is not mandatory for this assignment as you will be referring to mainly Modules notes and the textbook. Nevertheless, it is still good practice to reference, even if only referring to module notes. 

  1. Look up the meaning of “hysteresis” in a good dictionary. Explain how and why economists sometimes deploy this fairly specialised concept.
  2. Explain how cyclical unemployment can give rise to structural unemployment over a prolonged period of time.
  3. Refer to Module Eight: ‘Inflation Theories’. Outline the features of phase two (1970s and 80s: Expectation Augmented Phillips [EAPC] theory. What is the role of the government in this theory?
  4. “Inflation is an outcome of conflict over distribution of income between competing groups”. Explain this statement by reference to conflict theory.
  5. How do Governments usually bring an inflationary process to a halt? Briefly explain how their strategies to deal with rising inflation could sometimes be counterproductive in the longer term.
  6. Since the early 2000s in several OECD countries,  inflation rates have not varied much but unemployment rates have fluctuated much more. For example in Australia since 2000, unemployment has ranged between 4% to 7% (currently at 5.7%), but the rate of inflation has hardly varied in comparison and remains very low (currently 1% p.a.). Drawing on the modern explanations of the inflation – unemployment relationship, briefly explain what is likely happening.
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