Part 1: Define inflation and its economic consequences using valid sources.

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Part 2: Consider the reasons of high inflation in the UK .Choose one of the following government policies/practices/actions to reduce inflation rate .

• Increase the Interest Rate (the Bank of England has recently increased the interest rate)
• Changes in tax regime (the government decided to reduce taxation rate)
• Lowering government expenditure (the government reduced the public expenditures)

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Part 3: Assess /analyse the impact of the chosen policy /action /practice in part 2 -

You might need to consider PESTEL Analyses / supply and demand laws and use the following themes

(Discuss Min 4):

• The expected impact on GBP Value
• Consumer purchase power
• The expected impact on the general consumer price index (CPI)
• The expected impact on UK Exports and Imports(Impact on BOP /current account )
• The expected impact on foreign direct investment (FDI) and foreign portfolio investment (FPI) (impact on BOP /capital account )
• The expected impact on houses prices and mortgages rate
• The expectedimpact on employment rate
• Other social and technological factors