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"If faced with rising inflation, the government might apply a severe contradictory economic policy. What might that involve and what might be the effects upon a business of your choice?"
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BUSINESS STUDIES H/W 2 Q: "If faced with rising inflation, the government might apply a severe contradictory economic policy. What might that involve and what might be the effects upon a business of your choice?" Inflation is the general rise in prices across a wide range of goods and services. Inflation is also the loss in the purchasing power of money. The government may apply a contradictory policy; this may include changing the interest rates. This will mean it becomes more expensive for people and businesses to morrow money. Therefore, businesses will invest less. Individual will consume less because they will be paying more else where in mortgages reducing the amount of surplus money that would have normally been available. The cuts in investment and the cuts in spending will mean a reduction in the level of demand in the economy. The second method is by increasing Taxes, this reduces purchasing power and...
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