Suggested Answers of BT2 Revision Package - ASKnLearn

(b) Discuss the view that price control is the most effective way to reduce inflation in an economy.[15]Interpret the QuestionCue Word(what are the skills required for thisquestion?)Discuss- A balanced answer wherebycircumstances of when priceceiling is most effective andwhen it is not is expected- The thesis/anti-thesis approachis recommendedConcepts(what are the conceptsrequired to answer thisquestion?)- To convert “pricecontrol” to mean“price ceiling”Context(what is the context for thisquestion?)InflationKey word“Most effective” implies a needto demonstrate comparison with2 or more policies.Schematic Map“reduce” means a fall in GPLwith/without solving inflationIntro :Define inflation/policies which can be usedBody : Thesis: When is price ceiling most effectiveAnti-Thesis : When is price ceiling less effective/use of otherPoliciesConclusion :Take a stand to the viewThinkingprocessDefineterms andscope theanswerThesis :Benefits ofpriceceilingIntroductionInflation is the sustained increase in the general price level of an economy. Thereare many policy tools that can be used to reduce inflation in an economy. In 3(a), aprice ceiling is one of the ways in which excessive price increases can beprevented. Others include demand management policies such as contractionarymonetary and fiscal policy, supply side policies, as well as exchange rate policy ofcurrency appreciation.BodyPrice ceilings is the most effective to reduce inflation1. If inflation is high and unanticipated, then the consequences on the economycan be very damaging. Hence there is a need to put an immediate stop to theescalating prices. There are two ways to bring about an immediate stop to priceincreases, namely currency appreciation or price ceilings.2. For open economies, currency appreciation is used as its impact is immediatelytranslated in the form of lowered import prices and when such economies areimport reliant for its sources of raw materials, intermediate inputs and finished