Grade 12Inflation Economics Grade 12 Questions and Answers

Inflation Economics Grade 12 Questions and Answers

Inflation Economics Grade 12 Questions and Answers. Inflation is an increase in the prices of goods and services. The most well-known indicator of inflation is the Consumer Price Index (CPI), which measures the percentage change in the price of a basket of goods and services consumed by households (see Explainer: Inflation and its Measurement).

INFLATION QUESTIONS AND ANSWERS GRADE 12

Activity 1
Study Figure 12.2 below and answer the questions that follow:
12.2

  1. Define the concept inflation. (2)
  2. When did the inflation rate peak? (2)
  3. Do we adhere to the inflation target set by government from July 2010–Jan 2011? Supply figures. (4)
  4. Explain what you would do to lower the inflation rate in our country? (4)
  5. Which institutions in South Africa make inflation figures available? (2)
  6. What, according to you, caused the double figures in April–July 2008? (4)
  7. Why are these figures in the graph not a reflection of hyperinflation? (4)
    [22]
Answers to activity 1

  1. A sustained and significant increase in the general price level over a period of time.  (2)
  2. July 2008  (2)
  3. Yes Inflation target between 3 – 6 %  (4)
  4. Apply monetary (repo rate)  and fiscal policies (tax increases)  (4)
  5. SARB and Stats SA  (2)
  6. Excessive consumer spending.  Due to the capital expenditure by the state for the Soccer World Cup  (4)
  7. Hyperinflation starts at 50%  (4)
    [22] 

Activity 2
Study the cartoon below and answer the questions that follow:
act2

  1. What is the message behind the cartoon? (2)
  2. What is happening to the purchasing power of the money? (2)
  3. In which country is this woman a consumer? Motivate your answer. (4)
    [8]
Answers to activity 2

  1. Due to inflation, the consumer can buy less for the same amount (2)
  2. Declining  (2)
  3. USA She is carrying US Dollars ($) in her basket (4)
    [8]

Activity 3
Name any THREE fiscal measures to control inflation. (3 × 2) [6]

Answers to activity 3
Increase direct taxation (personal income tax) if inflation is due to excess demand

  • Increase indirect taxation (VAT)
  • A loan levy is introduced
  • The state cuts back on expenditure
  • The finance budget deficit is non-inflationary
  • Impose surcharges on imported goods  (any 3) (3 × 2)
    [6] 

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