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monetary 
value
, could give a 
competitive advantage
to whoever has it or has 
nuisance value
. 
(Chapter 2)
11 Data 
maximisation 
It is data minimisation that is a data protection principle. 
(Chapter 2)
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PRACTICE QUESTION AND ANSWER BANK 
 
534
 
12 (a)
 
Yes 
No 
Company law 

Employment law 

Industry regulation 

Consumer protection 

As Constance is a sole trader, she will not be affected by company law. However, she 
could be affected by employment law, by industry regulation and by consumer protection. 
(b) 
Ad hoc
As Constance is considering using outsourcing for only a short period, this is ad-hoc 
outsourcing. 
(Chapter 2)
13 Fiscal 
Monetary policy focuses on money supply, the monetary system, interest rates, exchange rates 
and the availability of credit. Social policy focuses on workplace regulation, labour supply, 
education and skills. Industry policy focuses on matters such as freedom of trade, entry barriers 
and capacity, and industry regulation. 
(Chapter 3)
14 
A reduction in the rate of domestic inflation
A fall in the exchange rate makes a country's exports cheaper to overseas buyers, and imports 
more expensive: it therefore has the first three effects. The increase in the cost of imports, 
however, is likely to add to the rate of domestic inflation. 
(Chapter 3)
15 
Demand pull
Demand pull inflation occurs when the economy is buoyant and there is a high aggregate 
demand, in excess of the economy's ability to supply. Cost push inflation occurs where the costs 
of factors of production rise. 'Frictional' is not a term applied to inflation, but to unemployment 
(referring to the lead time required to match workers with jobs). 
(Chapter 3)
16 (a) Technological 
Frictional and seasonal unemployment are short term, whereas XYZ's employees are being 
permanently laid off. Structural unemployment results from long-term changes in an 
industry. In XYZ's case, the workers are being made redundant because of new technology 
and so the correct answer is technological. 
(b)