Inflation is when there is a rise in average price level. It is measured by the CPI which tracks the monthly prices of a weighted average basket of goods and services. If inflation was very high, and above the 2% target rate, this would be damaging to the UK economy. If prices are constantly rising, it is very likely that wages are not rising as often. If this is the case, disposable incomes would be falling as consumers would have less money left over after their normal spending. This would lead to a decline in living standards. Workers may ask firms for higher wages. Firms could then choose to increase wages and push prices up even more, or firms could lay-off workers. If firms decide to lay-off workers, then this would cause an increase in the unemployment rate.
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National Debt | A-Level Economics Model Paragraph (AQA, Edexcel, OCR)
* national debt is the acccumulation of budget deficits over multiple years
* a budget deficit is when gov spending > tax revenue
* this is bad because it means the government will have high interest
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Savings Gap | A-Level Economics Model Paragraph (AQA, Edexcel, OCR)
* the Harrod-Domar model suggests that low national savings and poor capital output are the biggest barriers preventing the development of an economy
* it explains that
* higher level of savings
* makes investment in capital
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Primary Product Dependency | A-Level Economics Model Paragraph (AQA, Edexcel, OCR)
* many developing countries rely on exporting primary products to generate income
* this is a barrier to economic development because
* the prices of primary products are volatile - due to sudden changes in the