DeXtEr Economics Neco GCE

Q4.
Division of labour is process in which a
worker or group of workers is assigned a
specialized task in order to increase
efficiency.

4b. Advantages of Division of Labour
i. Higher productivity
ii. Lower costs
iii. Simplified training
iv. Greater cooperation
v. Better goodwill:

Q3a
An entrepreneur is someone that creates
a new business. This can carry a high risk
because it requires money to set up a
new business without knowing if it will
give a return on investment.

Q3b
i. job creation
ii. inspiration
iii. Innovation
iv. Economic Development

Q6
positives effect of inflation to an
economy.
1. Deflation (a fall in prices – negative
inflation) is very harmful. During a
prolonged period of deflation and very
low inflation, the Japanese economy has suffered lower growth because of
deflationary pressures.

2. Moderate inflation enables adjustment
of wages. It is argued a moderate rate of
inflation makes it easier to adjust relative
wages. For example, it may be difficult to cut nominal wages (workers resent and
resist nominal wage cut).

3. Inflation enables adjustment of relative
prices. Similar to the last point, moderate
inflation makes it easier to adjust relative
prices.

**NEGATIVE EFFECT OF INFILATION
1. Inflationary growth tends to be
unsustainable leading to a damaging
period of boom and bust economic cycles.
For example, the UK saw high inflation in
the late 1980s, but this economic boom was unsustainable and when the
government tried to reduce inflation, it led
to the recession of 1990-92.

2. Inflation tends to discourage
investment and long term economic
growth. This is because of the uncertainty and confusion that is more likely to occur
during periods of high inflation.

3. Inflation can make an economy
uncompetitive. For example, a relatively
higher rate of inflation in Italy can make
Italian exports uncompetitive, leading to lower AD, a current account deficit and
lower economic growth.