Discuss the Benefits and Drawbacks of Low Inflation, and Describe

question 8

Essay

Discuss the benefits and drawbacks of low inflation, and describe issues in central bank policy following the financial crisis that began in 2008.

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Definitions:

Price Level

A measure of the average prices of goods and services in the economy at a given time.

Output

The total amount of goods and services produced by an economy, a sector, or a company over a specific period of time.

Real Wages

Wages adjusted for inflation, representing the purchasing power of wages in terms of goods and services, unlike nominal wages which are not adjusted for inflation.

Unemployment

The situation in which individuals who are capable of working and are actively seeking work but are unable to find a job.