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Business, Economics and Commercial Studies Discussion Group
Vuyo Mwatse (Tutor)
(, )
Why might uncertainty arise during a period of sustained price rises? a) Because resource costs will increase b) Because a redistribution of income process will take place c) A real reduction in international competitiveness will arise d) Inflation tends to cause things to be less predictable and this makes planning more difficult
ALL ANSWERS
Jade
(University of Cape Town, )
D) is the answer as inflation tends to lead to less certainty and so business becomes less likely to invest and expand. A) is part of unanticipated inflation but is not directly related to uncertainty. B) also takes place during a period of unanticipated inflation and can cause serious social problems. C) may also take place and may lead to increases in unemployment. It is always worth thinking about links between the main parts of macroeconomics, as a change in one may well affect another.