Formative Test Reflection

Question: Use AD/AS diagrams to explain the causes of inflation

I did the diagrams correctly but I was disappointed with my answer because from what I’ve seen in the answers list, I did not include all the answers needed to ace this test. I included about half of the answers needed.

To improve this test, I need to study more on the vocabulary and explain in detail.


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Government Spending Mindmap

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Activity 4: China

China Raises Reserve Ratio to Curb Inflation as Zhou Pledges More to Come

Key vocabulary from the article

  • Cool inflation = China is concerned that average prices levels are rising too quickly as the economy is overheating.
  • Imported inflation = Inflation in other countries, Higher input price for goods and reduce competitive pressure on import-competing domestic goods price of domestic goods may increases.
  • Monetary Tightening = A course of action undertaken by the Federal Reserve to constrict spending in an economy that is seen to be growing too quickly, or to curb inflation when it is rising too fast
  • Global Financial Crisis = A global recession 
  • Imported commodities = A good for which there is demand, but which is supplied without qualitative differentiation across a market
  • Economic imbalances/Balance of trade = The difference between the monetary value of exports and imports of output in an economy over a certain period
  • Gross domestic product = The market value of all final goods and services produced within a country in a given period
  • “Prudent” policy =  Policy acting with or showing care and thought for the future
  • Monetary Policy = Monetary policy is the process by which the monetary authority of a country controls the supply of money
  • Reserve ratio/Reserve requirement = The reserve requirement is a central bank regulation that sets the minimum reserves each commercial bank must hold

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Unemployment and Economic Freedom

The neoclassical argument in the Economics is that the government should not be interfering with the market, which may cause rises in unemployment rates. The findings that we have found from this website ( shows that Singapore, the world’s second most unregulated government has a 2% unemployment rate, which proves the point that there should be no government actions in the economy. On the other hand, this neoclassical argument may not be true in all the countries. Let’s take Hong Kong as an example, Hong Kong, however, still has a 4.3% unemployment rate even though they have the highest ranking in freedom.

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New auto sales in Japan plummet 37% after disaster

New auto sales in Japan plummet 37% after disaster

The article talks about how sales in Japan has dropped by 37% after the natural disaster. This will mean a drop in the aggregate supple curve, due to the increase in number of unemployment.


Firstly, The aggregate supply curve depicts the quantity of real GDP that is supplied by the economy at different price levels. A natural disaster is likely to impact aggregate supply. This impact lead to an increase in input prices and thus raise costs. This diagram shows the shift in aggregate supply curve to the left from AS1 to AS2. This will lead to a rise in price levels from P1 to P2. This rise is relatively large and can be explained by the fact there’s a significant rise in the auto sales prices. As AS shifts to the left, the capacity of the economy fall and we would expect real national income to fall to Q2 and the economy will experience lower economic growth. This is likely to lead to a rise in unemployment, as producers will try to cut costs and cut labor costs.

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Consumer spending, personal income rise in January

The article can be found here

Aggregate demand is the total expenditure on the national output at different values of the price level over a given period of time. As we all know, a rise in income is one of the main determinants of AD, which is will impact the consumers and bring about the rise in AD. This article basically talks about how consumer spending rose 0.2 percent in January after increasing 0.7 percent last year, in which it effects the rise in personal income by 1 percent.


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The Best Economy

First group: Mana, Paolo and Pat (My group)

Our group started off with a good title page and introduction. I think that we did well on the presentation but the graphs were not perfect. We might need to order each countries and make our presentation more organized.

Second group: Bridget, Akash, Will and Raymond

This group did really well on organizing and on powerpoint. The only thing they didn’t go well were that some of the people in the group did not explain clearly about what they were trying to present and I didn’t clearly understand.

Third group: Sonny, Hannah, Bryan and Alka

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