School IB DP economics class: Japan struggles to adapt to an era of rising prices

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Specification:

• Demand and supply, efficiency, inflation, aggregate demand and aggregate Supply (AD-AS), trade and tariffs

Click to read the article and then answer the questions:

Japan struggles to adapt to an era of rising prices

1. Definitions:

• Define the following terms as they relate to the case: i) Inflation (2 marks); ii) Deflation (2 marks)

• Based on the fourth graph ‘Japan’s lost decades’ research and analyse the causes for Japan’ slow growth. (5 marks)

2. Diagrams:

• Using a wage spiral (AD-AS) diagram, explain the effect of rising costs of wages and inflation on the general price level and output in Japan. (4 marks)

• Using a Phillips curve diagram, explain the short-term relationship between inflation and unemployment in the context of Japan’s rising prices. (4 marks)

• Using a LRAS diagram explain the impact of Japan’s falling productivity and ageing population may impact the long term growth in Japan. (4 marks)

• Using a foreign exchange market diagram, explain how rising domestic inflation in Japan could impact the value of the Japanese yen against other currencies. (4 marks)

3. Discussion:

• Discuss the potential economic and social consequences of Japan’s transition from a deflationary period to an inflationary environment. Consider impacts on consumers, businesses, government policy, and income distribution. (15 marks)

Sandeepa Madan, Shiv Nadar School