Answer these questions.Put missing words.Effects of deflation.

Possible causes of demand-pull inflation include: A in the exchange rate . Fiscal stimulus e.g. via a in direct or indirect taxation or government spending. . Monetary stimulus to the economy e.g. a in interest rates.. Faster in other countries. . Rising consumer and businessInvestment . Lower AD, output gap... reduces need for investment Increased debt burden... reduces investment . Increased real rate of interest and fall in on projects (revenue falls) ... reduces investment . Fall in as revenues fall .... reduces investment . Fall in business .... reduces investment . Benign deflation ... increases investment Balance of Payments price competitiveness increases exports and reduces imports improving balance of trade on the current account (UK trade balance example) . Lower investment will reduce competitiveness (UK compared to trading partners) . Falling and lower production reduces imports . Deflation in other countries (examples) will reduce exports as GDP and consumption falls in other countriesEconomic Growth and Unemployment o Malign points from above. . ...C,I fall, reducing leading to a fall in GDP (recession) (diagram) 0 Exports increase? and imports fall will increase AD 0 Falling AD leads to unemployment (disequilibrium unemployment) 0 Firms cutting labour costs will increase unemployment 0 Real wages rise, may lead to unemployment (disequilibrium unemployment) (diagram) 0 Nominal wages (actual wage) need to fall which may be resisted by TUs - friction in the labour market causing real wage unemployment to persist 0 Falling nominal wages may lead to money illusion and higher unemployment (equilibrium unemployment) o higher structural unemployment if capacity shrinks (LRAS shifts to the left) (equilibrium unemployment) - Benign. . .. shifts to the right - Long run economic growth and rising GDP (short term economic growth) and falling unemployment