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Assess the view that as the rate of economic growth increases, a rise in inflation is inevitable

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Use the extracts and your knowledge of economics to assess the view that as the rate of economic growth increases, a rise in inflation is inevitable.

(AS-Level Economics Paper 2 June 2020)

Plan

  • Intro: four objectives, conflicts.
  • P1
    • Argument: yes it is very likely that economic growth causes inflation
    • Diagram: right shift in AD
    • Evaluation: depends on the state of the economy
  • P2
    • Argument: if the gov plan ahead with supply side policies, then the economy can grow without causing inflation
    • Diagram: right shift in LRAS
    • Evaluation: opportunity cost and time lag
  • Conclusion: economic growth often causes inflation, but not always