Question

9. (a) Highlight the difference between creeping inflation and hyper inflation.
(b) List any four negative effects of inflation.
(c) Outline four ways in which the government of your country can control inflation.

Accepted Answer

(a) Creeping inflation is a moderate but persistent rise in the price level, while hyperinflation is a very rapid rise in the general price level, which is also persistent (and far more severe/uncontrolled).

(b) Negative effects of inflation: (i) It reduces workers' real income. (ii) It affects capital formation adversely. (iii) It discourages savings. (iv) It can worsen the balance of payments problem. (v) It makes planning difficult.

(c) Ways government can control inflation: (i) Boosting production by giving subsidies to producers. (ii) Reduction in government expenditure. (iii) Increasing personal income tax. (iv) Increasing the interest rate. (v) Wage control or wage freeze.

WAEC Economics 2013 Theory — Question 10

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