Economics Unit 2 Edexcel - Managing the UK economy Tuesday 19th May 2015 (PM)

More employment = more inflation, as the general price level increases since consumers have more disposable income increasing AD

However, increased inflation, could lead to stagflation if the economy is not growing enough and workers would demand higher wages since purchasing power has fallen forcing companies to lay off workers leading to a rise in unemployment.

This is probably going to make myself look like an idiot, but what's the difference between an output gap and spare capacity?
Or are they the same thing and the output gap represents the spare capacity?

For the '1) Assess the use of fiscal policies to improve the standard of living' question. Would an increase in the SOL be represented by AD shifting to the right, as wages increases they have more disposable income and there's an increase quality and quantity of goods and services'.
And as an EV you could say that there's risk of hyperinflation and so wages may infact be lower than the previous years?
Is this correct, I always get fairly confused with the SOL of living Qs. Hoping for a 30 marker on supply side policies, macroeconomics objectives or reduction in the national debt.

POSSIBLE 30- MARKERS: ACCORDING TO TUTOR2U BASED ON CURRENT ECONOMIC CLIMATE
1) Assess the use of fiscal policies to improve the standard of living
2) Assess the policies that might be used to prevent deflation in the UK
3) Evaluate policies the UK govt. can use to reduce unemployment WITHOUT rising inflation
4) Evaluate benefits of falling unemployment for the UK economy
5) Evaluate the likely economic effects of the UK exchange rate appreciating against the Euro

For the '1) Assess the use of fiscal policies to improve the standard of living' question. Would an increase in the SOL be represented by AD shifting to the right, as wages increases they have more disposable income and there's an increase quality and quantity of goods and services'.
And as an EV you could say that there's risk of hyperinflation and so wages may infact be lower than the previous years?
Is this correct, I always get fairly confused with the SOL of living Qs. Hoping for a 30 marker on supply side policies, macroeconomics objectives or reduction in the national debt.

can u help draft these, as in put like what each paragraph would be, + eval points xxx

3) Evaluate policies the UK govt. can use to reduce unemployment WITHOUT rising inflation



This might help you, its not really about not increasing inflation though.

Can someone explain how there can be high employment when inflation is low please!

when you draw your AS/AD graphs do you draw the As curve slanting upwards (short run) or the long run curve? Silly question but just making sure if they accept either