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Topical›Economics 9708›The Macroeconomy (AS Level)›Price stability›Paper 1

Price stability — Paper 1 · A Level Economics 9708

4.6· 232 questions · 232 marks · 278 min · 2005–2025· Multiple choice

Every Cambridge A Level Economics Paper 1 question on price stability, laid out as 67 A4 pages with the mark scheme below. Nothing is left out. Free to read, no account.

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Questions67 pages

Question 1: The table shows the weights used over three years in the UK consumer price index. 2001 2002 2003 food 116 114 109 motoring expenditure 140 …Question 2: The data given below refers to money supply and prices in the years 2001 and 2004 in four countries A, B, C and D. Between 2001 and 2004, i…Question 3: A government announces that it has achieved its target of 2.5 % inflation per annum and that it expects to maintain it. How might such an a…1 / 67
Question 4: The table shows the year-on-year percentage changes for a country's consumer price index from 1999 to 2005. year % change 1999 18.0 2000 11…Question 5: What is most likely to cause demand-pull inflation? A an increase in indirect taxes B an increase in interest rates C a reduction in direct…Question 6: Increased international competition leads to a worsening in a country’s current account balance. In the absence of any offsetting factors, …2 / 67
Question 7: The diagram shows rates of inflation as measured by the Consumer Price Index (CPI) between 1997 and 2004. services and goods CPI inflation …Question 8: The table shows a country’s rate of inflation for four years. rate of inflation year % 2000 4.0 2001 3.0 2002 2.5 2003 2.0 What fell betwee…Question 9: What is not a possible cause of cost-push inflation? A an increase in firms’ profit margins B an increase in the supply of money C an incre…3 / 67
Question 10: The table shows the retail prices index for four countries for years 2 and 3. (Year 1 index = 100 for all countries.) Which country had a h…Question 11: Which combination is likely to result from demand-pull inflation? balance of trade profits A worsening rising B improving rising C worsenin…Question 12: What would be likely to increase inflation in an economy? A an increase in consumer saving B an increase in interest rates C an increase in…Question 13: In the UK in the summer of 2002 the Euro was worth £0.62. In the summer of 2003 the Euro was worth £0.72. How was this change likely to hav…Question 14: A country experienced an annual inflation rate of 4 % for three successive years. Which statement is correct for the three-year period? A T…4 / 67
Question 15: What would be likely to decrease inflation in an economy? A an increase in consumer spending B an increase in employment C an increase in l…Question 16: A country’s Consumer Price Index increased from 100 to 200 over a five-year period. What can be deduced from this? A The economy experience…Question 17: Before 1999 the Brazilian government did not have a desired target rate of inflation. From 1999 it set target rates within an upper and low…5 / 67
Question 18: The figures were taken from the consumer price indices of retail prices for three countries. country 2006 2007 X 100 120 Y 140 150 Z 90 99 …Question 19: What is correct about the causes of inflation? A Cost-push inflation can be caused by a rising exchange rate. B Cost-push inflation can be …Question 20: What is the average weighted price change illustrated by the table below? percentage of income price change product spent on product % P 10…6 / 67
Question 21: The diagram shows the annual rate of inflation in a country between 2000 and 2003. 10 8 6 rate of inflation % 4 2 0 2000 2001 2002 2003 yea…7 / 67
Question 22: The graphs show consumer prices and employment for Ireland. 4 3 consumer prices % increase on a 2 year earlier 1 0 2002 03 04 05 06 07 7.0 …Question 23: What may cause cost-push inflation? A an appreciation of the exchange rate B a higher level of consumption C an increase in labour producti…Question 24: What may cause cost-push inflation? A an appreciation of the exchange rate B a higher level of consumption C an increase in labour producti…8 / 67
Question 25: The graphs show consumer prices and employment for Ireland. 4 3 consumer prices % increase on a 2 year earlier 1 0 2002 03 04 05 06 07 7.0 …Question 26: The average consumer divides his expenditure between food, accommodation and clothing in the ratio 5 : 3 : 2. During the course of a year, …Question 27: Which statement about inflation is correct? A Cost-push inflation is likely to occur when the government increases its expenditure. B Deman…9 / 67
Question 28: The table shows a country’s rate of inflation for four years. rate of inflation year % 2005 4.0 2006 3.0 2007 2.5 2008 2.0 What fell betwee…Question 29: The average consumer divides his expenditure between food, accommodation and clothing in the ratio 5 : 3 : 2. During the course of a year, …Question 30: Which statement about inflation is correct? A Cost-push inflation is likely to occur when the government increases its expenditure. B Deman…Question 31: The table shows a country’s rate of inflation for four years. rate of inflation year % 2005 4.0 2006 3.0 2007 2.5 2008 2.0 What fell betwee…10 / 67
Question 32: The average consumer divides his expenditure between food, accommodation and clothing in the ratio 5 : 3 : 2. During the course of a year, …Question 33: Which statement about inflation is correct? A Cost-push inflation is likely to occur when the government increases its expenditure. B Deman…Question 34: The table shows a country’s rate of inflation for four years. rate of inflation year % 2005 4.0 2006 3.0 2007 2.5 2008 2.0 What fell betwee…11 / 67
Question 35: The table shows the percentage price changes in some items in the UK Consumer Price Index (CPI) in the year to 1 June 2006. item % change i…Question 36: In Year 1 the price of a barrel of oil increased from $60 to $110. In Year 2 there was a further increase to $115 a barrel. Assume that oil…12 / 67
Question 37: The table shows the percentage price changes in some items in the UK Consumer Price Index (CPI) in the year to 1 June 2006. item % change i…Question 38: In Year 1 the price of a barrel of oil increased from $60 to $110. In Year 2 there was a further increase to $115 a barrel. Assume that oil…13 / 67
Question 39: The table shows the percentage price changes in some items in the UK Consumer Price Index (CPI) in the year to 1 June 2006. item % change i…Question 40: In Year 1 the price of a barrel of oil increased from $60 to $110. In Year 2 there was a further increase to $115 a barrel. Assume that oil…14 / 67
Question 41: The table shows inflation rates, unemployment rates and changes in money wage rates between 2008 and 2009 for a number of countries. inflat…Question 42: The diagram compares the inflation rates of Paraguay and Argentina between 1950 and 2005. 120 100 key 80 inflation Paraguay 60 (%) Argentin…Question 43: Over a period of a year, the annual rate of inflation falls from 10 % to 6 %. Which statement is correct? A The cost of living has increase…15 / 67
Question 44: The table shows inflation rates, unemployment rates and changes in money wage rates between 2008 and 2009 for a number of countries. inflat…Question 45: The diagram compares the inflation rates of Paraguay and Argentina between 1950 and 2005. 120 100 key 80 inflation Paraguay 60 (%) Argentin…Question 46: Over a period of a year, the annual rate of inflation falls from 10 % to 6 %. Which statement is correct? A The cost of living has increase…16 / 67
Question 47: The table shows inflation rates, unemployment rates and changes in money wage rates between 2008 and 2009 for a number of countries. inflat…Question 48: The diagram compares the inflation rates of Paraguay and Argentina between 1950 and 2005. 120 100 key 80 inflation Paraguay 60 (%) Argentin…Question 49: Over a period of a year, the annual rate of inflation falls from 10 % to 6 %. Which statement is correct? A The cost of living has increase…17 / 67
Question 50: The table shows the annual percentage change in an index of prices. country 2008 2009 China 6.3 –1.2 Pakistan 24.3 11.2 Saudi Arabia 10.9 1…Question 51: Which combination is likely to result from demand-pull inflation? balance of trade profits A improving falling B improving rising C worseni…Question 52: The average consumer divides his expenditure between food, clothing, accommodation and transport in the ratio 2 : 1 : 4 : 3. During the cou…Question 53: At the start of 2009, a worker earned $100 a week. In 2009, the Retail Price Index (RPI) rose 4 % and his average wage rose 7 %. In 2010, t…18 / 67
Question 54: The table shows the annual percentage change in an index of prices. country 2008 2009 China 6.3 –1.2 Pakistan 24.3 11.2 Saudi Arabia 10.9 1…Question 55: Which combination is likely to result from demand-pull inflation? balance of trade profits A improving falling B improving rising C worseni…Question 56: In which year did the real value of money rise? Price Index year (base year 2001) A 2002 100 B 2003 104 C 2004 104 D 2005 10319 / 67
Question 57: Before 1999 the Brazilian government did not have a desired target rate of inflation. From 1999 it set target rates within an upper and low…Question 58: The figures show the Consumer Price Index (CPI) of a country. (1990 = 100) CPI 2007 200 2008 204 2009 206 2010 209 What can be deduced from…Question 59: In which year did the real value of money rise? Price Index year (base year 2001) A 2002 100 B 2003 104 C 2004 104 D 2005 10320 / 67
Question 60: The table shows the price indices and weights for the three commodity groups that make up the calculation of a country’s consumer price ind…Question 61: Before 1999 the Brazilian government did not have a desired target rate of inflation. From 1999 it set target rates within an upper and low…Question 62: Which statement about a rise in the general price level in a country is correct? A It is likely to create economic winners and losers in th…21 / 67
Question 63: The table shows detail of the nominal interest rate and the inflation rate for selected countries in July 2010. nominal country inflation r…Question 64: The table gives some information on inflation rates, unemployment rates, and changes in wages for a number of countries in 2006. annual inf…22 / 67
Question 65: The data given below refers to money supply and prices in the years 2006 and 2010 in four countries. Between 2006 and 2010, in which countr…Question 66: A sudden rise in the price of imported oil caused the annual rate of inflation in a given period to be higher than expected. What might be …Question 67: The graph shows a country’s average annual inflation rate over a five year period. average annual inflation rate (%) 1 2 3 4 5 year What ca…23 / 67
Question 68: The table shows the annual rate of inflation in the UK between 2005 and 2010 measured by the retail price index (RPI) and the consumer pric…Question 69: The diagram shows the annual rate of inflation in a country between 2006 and 2009. 10 8 6 rate of inflation % 4 2 0 2006 2007 2008 2009 yea…24 / 67
Question 70: The exchange rate of the Mexican peso against the US$ changed from 10 pesos = 1 US$ to 9 pesos = 1 US$. During the same period, the general…Question 71: The table shows an index number of prices between 2009 and 2012. In the base year of 2008, inflation was 2% per annum. What was the first y…Question 72: What will be the probable effect of an increase in indirect taxes on demand-pull inflation and on cost-push inflation? demand-pull cost-pus…Question 73: A country experienced an annual inflation rate of 2% for four successive years. Which statement is correct for the four-year period? A The …25 / 67
Question 74: In 2010 it was reported that there were concerns when a government kept interest rates very low despite a threat of inflation. Why might th…Question 75: The diagram shows the aggregate demand (AD) and short-run aggregate supply (SRAS) for an economy with a price level OP. SRAS price P level …Question 76: It is anticipated that the rate of inflation in a country will continue to rise. What is most likely to increase as a result? A balance of …26 / 67
Question 77: The diagram illustrates what happens to aggregate demand (AD) and aggregate supply (AS) in an economy during a year. AS general P1 price le…Question 78: What would increase both demand-pull and cost-push inflation? A an appreciation of a country’s currency B an increase in the cost of borrow…Question 79: The graph shows the annual percentage change in the prices of services and in the prices of goods between 2007 and 2012. 10 8 6 services % …27 / 67
Question 80: The table shows an index of consumer prices (2005 = 100) for a number of countries for 2009, 2010 and 2011. 2009 2010 2011 Canada 107.8 108…Question 81: In what circumstances will money lose its value? A The economy experiences a period of deflation. B The general level of prices is falling.…Question 82: The table shows a country’s rate of inflation for four years. rate of inflation year % 2009 4.0 2010 3.0 2011 2.5 2012 2.0 What fell betwee…Question 83: What is not a possible cause of cost-push inflation? A an increase in firms’ profit margins B an increase in raw material prices C an incre…28 / 67
Question 84: The table shows the changes in the general price level of four countries over three years expressed as index numbers. Which country experie…Question 85: In Year 1 the price of a barrel of oil increased from $60 to $110. In Year 2 there was a further increase to $115 a barrel. Assume that oil…Question 86: The table shows an index of consumer prices (2005 = 100) for a number of countries for 2009, 2010 and 2011. Which country experienced the l…Question 87: National inflation rates vary widely but they have declined for most countries in recent years. Which combination might best explain this d…29 / 67
Question 88: The graph shows the rate of inflation in a country in a 5 year period. + rate of inflation 0 % 1 1 2 2 3 4 5 – year What can be concluded f…Question 89: Which economic change might contribute to both cost-push and demand-pull inflation? A a fall in the exchange rate B a fall in the interest …Question 90: The weighting given to food in the construction of the United Kingdom’s Retail Price Index fell from 16.7% in 1987 to 11.8% in 2011. What w…Question 91: Which statement about inflation is correct? A Cost-push inflation is likely to occur when the government increases its expenditure. B Deman…30 / 67
Question 92: A country experienced an annual inflation rate of 4% for three successive years. Which statement is correct for the three-year period? A Th…Question 93: The table shows the CPI rate of inflation (%) in the US from 2006 to 2013. 2006 2007 2008 2009 2010 2011 2012 2013 2.5% 4.1% 0.1% 2.7% 1.5%…Question 94: How might an increase in the general price level lead to a rise in real household expenditure? A by increasing the expectations of further …Question 95: There is a depreciation in a country’s exchange rate. If wage costs remain unchanged, what would be the most likely consequence? A a fall i…Question 96: In an economy with an interest rate of 4% per annum, the rate of inflation falls from 5% to 3% per annum. What will be a benefit of this fa…31 / 67
Question 97: A country increases its labour productivity in the manufacturing industry. What is least likely to result from this? A higher economic grow…Question 98: What will be the impact on demand-pull inflation and on cost-push inflation of an increase in indirect taxes? demand-pull cost-push inflati…Question 99: At the start of 2009, a worker earned US$ 100 a week. In 2009, the Retail Price Index (RPI) rose by 4% and his average wage rose by 7%. In …Question 100: What is the most likely cause of cost-push inflation in an economy? A an increase in the exchange rate B an increase in the money supply C …32 / 67
Question 101: The table shows the consumer price index (CPI) for a country. year CPI 1 100 2 110 3 105 4 103 5 108 What can be concluded from the table? …Question 102: In the absence of offsetting changes, what would be likely to increase if a country’s exchange rate appreciates? A the cost of imported con…Question 103: An economy is experiencing accelerating cost-push inflation. Which group is likely to be least concerned by this? A borrowers B consumers C…33 / 67
Question 104: The table shows the Consumer Price Index (CPI) for a country. year CPI 2008 100 2009 104 2010 102 2011 105 2012 108 2013 111 Which statemen…Question 105: In June 2013, the Governor of the Bank of Namibia announced that the Central Bank’s lending rate would remain low as long as inflation rema…Question 106: The capital value of a non-interest bearing asset is index-linked. During a period of inflation, how will its money value and its real valu…Question 107: What is the likely effect on the volume of exports and imports if a country with a fixed exchange rate experiences a higher rate of inflati…34 / 67
Question 108: The table gives data for an economy. 2010 2011 2012 2013 2014 Gross Domestic Product (GDP) 200 220 240 300 320 at current prices ($ billion…Question 109: What always happens when there is an increase in the Consumer Price Index? A an increase in consumer expenditure B an increase in the cost …Question 110: In March 2014, Sweden had a change in its Consumer Price Index of –0.6%. Which combination of policies might the government use to restore …Question 111: The table shows information about a country whose consumers spend their income on three commodities, P, Q and R. index of index of consumer…35 / 67
Question 112: The UK inflation rate as measured by the Consumer Price Index was 5.2% in September 2011. In June 2014 the UK inflation rate as measured by…Question 113: A country experienced an annual deflation rate of 2% for four successive years. Which statement is correct for the four-year period? A The …Question 114: What must be true if an economy is experiencing inflation? A Aggregate demand is increasing. B Aggregate supply is decreasing. C The intere…Question 115: Suppose the average consumer’s expenditure is divided between bread, meat, milk and vegetables in the ratio 4 : 3 : 2 : 1. During the cours…36 / 67
Question 116: The table shows the share of a worker’s income spent on three classes of good and the percentage change in the prices of the goods over a y…Question 117: Over a period of a year, the annual rate of inflation becomes negative. Which statement must be correct? A The cost of living has fallen. B…Question 118: In 2012, the rate of inflation in Botswana was 7.5%. Person X kept all of their savings in the form of cash while Person Y put their saving…37 / 67
Question 119: The graph shows the annual percentage change in the prices of services and in the prices of goods between 2007 and 2012. 10 8 6 services % …Question 120: During a period of deflation an economy’s aggregate monetary demand falls. Which function of money explains this fall? A a measure of value…Question 121: An increase in a country’s consumer price index implies an increase in A the cost of living. B the rate of inflation. C the standard of liv…38 / 67
Question 122: The figures in the table were taken from the consumer price indices of retail prices for three countries. Country 2014 2015 X 100 120 Y 140…Question 123: Relative weights are used in calculating the index of retail prices to reflect the different A amounts of money spent by consumers on each …Question 124: The diagram shows the long-run aggregate supply (LRAS) curve of an economy. At which equilibrium level of national income is a balance of t…Question 125: A government succeeds in changing a current account deficit into a current account surplus. Why might this current account surplus increase…39 / 67
Question 126: In recent years an economy has experienced changes in its price level as shown. 6 percentage change of 4 price level 2 0 2010 2015 –2 Which…Question 127: Which statement about changing price levels is correct? A Anyone on a fixed income has rising real income during deflation. B Government re…Question 128: Which combination of events is most likely to cause inflation? exchange rate direct taxes money supply A falling falling falling B falling …40 / 67
Question 129: The table shows the year-on-year percentage changes for a country’s consumer price index from 2009 to 2015. year % change 2009 18.0 2010 11…Question 130: The table shows a country’s consumer price index for March and April 2015. consumer price index March 2015 151.3 April 2015 148.6 Which sta…Question 131: What would be likely to increase inflation in an economy? A an increase in consumer saving B an increase in interest rates C an increase in…41 / 67
Question 132: The table shows the retail prices index for four countries for years 2 and 3. (Year 1 index = 100 for all countries.) Which country had a h…Question 133: What would be likely to decrease inflation in an economy? A a decrease in consumer saving B a decrease in unemployment C an increase in lab…Question 134: What is the average weighted price change illustrated by the table below? percentage of income price change product spent on product % P 10…Question 135: During one year the national output of a country valued in terms of money prices increased by 8% while the index of the prices of all goods…Question 136: The table shows the CPI rate of inflation (%) in the United States from 2006 to 2013. 2006 2007 2008 2009 2010 2011 2012 2013 2.5% 4.1% 0.1…42 / 67
Question 137: What would be certain to cause a fall in a country’s cost of living? A a fall in real incomes B a fall in the inflation rate C a negative i…Question 138: The table gives figures for household spending in the UK economy between 2008 and 2010. nominal household real household consumption spendi…Question 139: The diagrams show the inflation rate over time in four countries. Which country experiences a falling cost of living throughout the period?…43 / 67
Question 140: The average consumer divides his expenditure between food, clothing, accommodation and transport in the ratio 2 : 1 : 4 : 3. During the cou…Question 141: In June 2016 the UK voted to leave the European Union. The table shows what happened to the value of the pound sterling before and after th…Question 142: The diagram shows the change in an economy’s rate of inflation over 4 years. inflation rate (%) 0 1 2 3 4 year What happened to the general…44 / 67
Question 143: The table shows the consumer price index (CPI) and national output at current prices in 2014 and 2015 for an economy. national output year …Question 144: A country experiences a fall in the consumer price index. What must be associated with such a fall? A a decrease in average wage rates B a …Question 145: A government is faced with rising inflation. It wishes to reduce inflationary pressure while avoiding a fall in output. Which action is mos…Question 146: Which effect of inflation is described as redistributive? A the improvement in the terms of trade B the increased reluctance of people to h…Question 147: An economy is experiencing a period of deflation. What must be happening? A The average price level is falling. B The output of the economy…45 / 67
Question 148: How is a rate of inflation that is lower than that expected likely to affect lenders and borrowers in an economy? effect on lenders effect …Question 149: What is likely to be the least effective store of value during a period of rapid inflation? A antique furniture B fixed interest government…Question 150: What always happens when there is an increase in the Consumer Price Index? A an increase in consumer expenditure B an increase in the cost …Question 151: Which change in economic circumstances is most likely to lead to a reduction in the rate of domestic inflation in an economy? A a depreciat…Question 152: The table shows the annual percentage increases in a country’s consumer prices index (CPI). year % change 2015 8.3 2016 6.0 2017 6.0 2018 1…46 / 67
Question 153: The graph shows the rate of inflation for seven countries for 2015 and 2016. 7 6 5 4 3 key 2015 2 2016 1 0 Costa Ecuador India Japan Malays…Question 154: What must be true if an economy is experiencing inflation? A Aggregate demand is increasing. B Aggregate supply is decreasing. C The intere…Question 155: Which statement describes disinflation? A a fall in the price level B a fall in the rate of inflation C a rise in the value of money D infl…Question 156: A country experienced a significant fall in unemployment but its inflation rate remained low. What could explain this? A Global competition…47 / 67
Question 157: According to US Consumer Prices Index (CPI) statistics, an identical good that cost $100 in 1913 would cost $2359.60 in 2013. What was the …Question 158: In an economy with an interest rate of 4% per annum, the rate of inflation falls from 5% to 3% per annum. What will be a benefit of this fa…Question 159: The graph shows the annual percentage change in the prices of services and in the prices of goods between 2007 and 2012. 10 % annual 8 pric…Question 160: The real national income of a country fell by 3%. What could have caused this? A Money national income fell by 3% when the rate of inflatio…48 / 67
Question 161: The data shows the consumer prices index (CPI) and an index of money wages in an economy during four years. year 1 2 3 4 CPI 100 102 105 11…Question 162: The government of an open economy with an overvalued currency decides to abandon its fixed exchange rate in favour of a floating exchange r…Question 163: Under which circumstance would the rate of inflation be most likely to fall? A Government spending increases and society’s marginal propens…Question 164: What term relates to a fall in the domestic real value of a currency? A deflation B depreciation C devaluation D inflationQuestion 165: To counter deflation a central bank uses expansionary monetary policy. What is likely to result? A a higher cost of borrowing B a higher ra…49 / 67
Question 166: Which statement about a rise in the general price level in a country is correct? A It is likely to create economic winners and losers in th…Question 167: The table shows a country’s consumer prices index (CPI) for March and April 2018. CPI March 2018 151.3 April 2018 148.6 Which statement cor…Question 168: The diagram shows the rate of inflation over time in four countries. Which country has a rising real value of money over time? A inflation …Question 169: Other things being equal, what is most likely to be reduced by falling labour productivity? A the balance of trade deficit B the internal v…Question 170: If the rate of inflation rises from 2% to 20%, which function of money is likely to be most affected? A medium of exchange B standard for d…50 / 67
Question 171: What is correct about the causes of inflation? A Cost-push inflation can be caused by a rising exchange rate. B Cost-push inflation can be …Question 172: What would be certain to cause a fall in a country’s cost of living? A a fall in real incomes B a fall in the inflation rate C a negative i…Question 173: A sudden rise in the price of imported oil caused the annual rate of inflation in a given period to be higher than expected. What might be …Question 174: The graph shows inflation rates over 10 years for selected emerging economies. 7 inflation % year on year 6 W 5 X 4 Y Z 3 2 2009 2010 2011 …51 / 67
Question 175: What is disinflation? A a fall in output B a fall in the price level C a fall in the rate of increase of the price level D a fall in the va…Question 176: A developed country has a price-inelastic demand for oil, all of which it imports. The oil-producing countries increase the supply of oil. …Question 177: What is the most likely cause of cost-push inflation in an economy? A an increase in the exchange rate B an increase in the money supply C …Question 178: Which changes are most likely to reduce the accuracy of the consumer prices index (CPI) as a measurement of inflation? A A larger sample is…Question 179: Which statement about inflation is correct? A Inflation will lead to a rise in exports. B Inflation will lead to a rise in real incomes. C …52 / 67
Question 180: There is an increase in indirect taxes. What will be the impact on demand-pull inflation and on cost-push inflation? demand-pull cost-push …Question 181: Which policy would be likely to increase inflation? A an increase in income tax B an increase in interest rates C limiting the amount banks…Question 182: The diagram shows the annual consumer prices index for Japan over the years 1990–2010 inclusive. 5 consumer 4 prices 3 index (%) 2 1 0 –1 –…53 / 67
Question 183: The table shows a country’s total output and its average price in each of three years. output price year (millions) ($) 1 10 20 2 12 24 3 1…Question 184: The aggregate demand (AD) and aggregate supply (AS) diagram shows an economy in equilibrium at X. In this economy, a severe shortage of raw…Question 185: Why will a contractionary monetary policy reduce inflation? A Banks will lend more. B Consumers will have higher disposable income. C Consu…54 / 67
Question 186: The diagram shows the annual inflation rate in an economy. 4 the rate of 3 inflation (%) 2 1 0 –1 –2 2012 2013 2014 2015 2016 2017 2018 yea…Question 187: What, if decreased, will help to reduce the rate of inflation? A budget deficit B direct taxes C exchange rate D interest rateQuestion 188: A household’s income increased by 3%. Over the same period, the rate of inflation was also 3%. Which statement is correct? A Both the nomin…55 / 67
Question 189: In 2018, the inflation rate in Argentina was over 100%. Which combination correctly identifies the winners and losers during this period? w…Question 190: A country is suffering from severe deflation. What is most likely to prevent the deflation from worsening? A increasing income tax to help …Question 191: What is a likely consequence of inflation? A Fixed-income earners gain more than those whose income is gained from the ownership of propert…56 / 67
Question 192: The diagram shows an aggregate demand (AD) and an aggregate supply (AS) curve. AS price level AD O national output There is a sustained ris…Question 193: Assuming the demand for oil is price-inelastic, what will be the effect on demand-pull inflation and on cost-push inflation in an oil-impor…Question 194: Which effect of inflation is described as redistributive? A the improvement in the terms of trade B the deterioration in the balance of tra…Question 195: During a period of deflation an economy’s aggregate monetary demand falls. Which function of money explains this fall? A a measure of value…57 / 67
Question 196: Which statement about changing price levels is correct? A Anyone on a fixed income has rising real income during deflation. B Government re…Question 197: What would be likely to decrease inflation in an economy? A a decrease in consumer saving B a decrease in unemployment C an increase in lab…Question 198: Which change in economic circumstances is most likely to lead to a reduction in the rate of domestic inflation in an economy? A a depreciat…Question 199: The graph shows a country’s average annual inflation rate over a five-year period. average annual inflation rate (%) 0 year 1 2 3 4 5 What …58 / 67
Question 200: In an economy, wages and prices are both rising but wages are rising faster. Which features are likely to exist in this economy? cost-push …Question 201: The table shows GDP indices for a country over a three-year period. year 1 year 2 year 3 real GDP 100 105 106 money GDP 100 107 115 Inflati…Question 202: Which group is most likely to suffer during high inflation? A borrowers B importers C producers D fixed wage earnersQuestion 203: If a country is experiencing a period of high inflation, which groups will benefit the most from this? companies that fixed income those wi…59 / 67
Question 204: Supply-side policies can be used to correct cost-push inflation. Which policy would best achieve this aim in the long run? A allowing trade…Question 205: Which statement best describes the consumer prices index (CPI)? A It is a measure of changes in the spending patterns of the average househ…Question 206: Under which conditions will nominal GDP and real GDP increase at the same rate in an economy? rate of change of rate of change of national …Question 207: Over a period of a year, the annual rate of inflation becomes negative. Which statement must be correct? A The cost of living has fallen. B…Question 208: An economy is experiencing accelerating cost-push inflation. Which group is likely to be least concerned by this? A borrowers B consumers C…60 / 67
Question 209: Which combination is possible for an economy experiencing zero inflation? average average nominal wages real wages A falling falling B fall…Question 210: The graph shows the rate of inflation in Japan from April 2020 to February 2021. 0.4 0.3 0.2 inflation 0.2 0.1 0.1 0.1 rate 0 0 –0.2 –0.4 –…61 / 67
Question 211: The graph shows the rate of inflation for seven countries for 2015 and 2016. 7 6 5 4 3 key 2015 2 2016 1 0 Costa Ecuador India Japan Malays…Question 212: What is least likely to cause a simultaneous increase in demand-pull and cost-push inflation? A depreciation of currency B increased import…Question 213: The table gives the value of the price index of an economy in two years. year price index 1 60 2 120 What can be concluded about the period…62 / 67
Question 214: What causes a rise in cost-push inflation? A a fall in the rate of income tax B a rise in the rate of income tax C a depreciation of the ex…Question 215: The diagram shows the effect on the average price level when aggregate demand (AD) increases from AD1 to AD2. average LRAS price level P2 P…Question 216: The table shows the Consumer Prices Index (CPI) for a country. year CPI 2008 100 2009 104 2010 102 2011 105 2012 108 2013 111 Which stateme…63 / 67
Question 217: What is most likely to cause the price level to rise? An increase in A productivity of labour. B raw material prices. C income taxes. D sub…Question 218: The table shows the values of Consumer Prices Index (CPI) and a worker’s salary in 2022 and 2023. CPI 2022 100 CPI 2023 110 worker’s salary…Question 219: In an economy with an interest rate of 4% per annum, the rate of inflation falls from 5% to 3% per annum. What will be a benefit of this fa…Question 220: A country experienced an annual deflation rate of 2% for four successive years. Which statement is correct for the four-year period? A The …Question 221: Governments may have price stability as a macroeconomic objective. What is meant by price stability? A All equilibrium prices are maintaine…64 / 67
Question 222: Which statement correctly describes an increase in real GDP? A Nominal GDP rising faster than nominal income. B Nominal GDP rising faster t…Question 223: The price of a pack of six eggs rises from $1.00 to $1.32 over a year. Consumer prices, as measured by the consumer price index, rise by 10…Question 224: The table shows the change in the value of UK sterling over a three-month period. June Sept £1 = $1.38 £1 = $1.32 What is likely to be the …Question 225: Price stability can be said to occur if the measured value of the consumer prices index (CPI) is unchanged during the year. Which statement…Question 226: An economy is experiencing a period of deflation. What must be happening? A The average price level is falling. B The output of the economy…65 / 67
Question 227: The table gives the terms of trade index for a country over three years. year 1 year 2 year 3 terms of trade 100 105 112 What is the most l…Question 228: The diagram shows the AD and AS curves for a low income country. Oil and gas make up 90% of its exports. The initial equilibrium level of n…Question 229: A central bank increases interest rates to reduce inflation. When will this policy be most likely to succeed? A When household spending is …Question 230: A country’s currency depreciates in terms of other currencies. What would be a consequence of this depreciation? A There would be a decreas…66 / 67
Question 231: Under which conditions will real Gross Domestic Product (GDP) grow the fastest? rate of change in rate of change in nominal GDP general pri…Question 232: The diagram shows changes in a country’s price level over a number of years. During which period of time did only disinflation occur? 5 pri…67 / 67

Mark scheme232 answers

Answers below. Sit the paper first if you are practising.

Pastlit

Economics 9708 · Price stability — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

1A1
2B1
3D1
4D1
5C1
6D1
7A1
8D1
9B1
10D1
11A1
12D1
13B1
14B1
15C1
16D1
17D1
18D1
19D1
20D1
21B1
22C1
23D1
24D1
25C1
26B1
27C1
28D1
29B1
30C1
31D1
32B1
33C1
34D1
35C1
36C1
37C1
38C1
39C1
40C1
41A1
42D1
43A1
44A1
45D1
46A1
47A1
48D1
49A1
1 / 5

Pastlit

Economics 9708 · Price stability — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

50C1
51D1
52B1
53C1
54C1
55D1
56D1
57D1
58D1
59D1
60C1
61D1
62A1
63C1
64A1
65B1
66A1
67A1
68D1
69B1
70B1
71B1
72D1
73B1
74A1
75C1
76C1
77A1
78C1
79C1
80C1
81D1
82D1
83C1
84D1
85C1
86—1
87—1
88D1
89A1
90C1
91C1
92B1
93D1
94A1
95B1
96C1
97D1
98B1
2 / 5

Pastlit

Economics 9708 · Price stability — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

99C1
100C1
101B1
102C1
103A1
104D1
105A1
106B1
107B1
108B1
109B1
110D1
111C1
112C1
113B1
114D1
115A1
116D1
117A1
118A1
119C1
120D1
121A1
122D1
123A1
124D1
125A1
126D1
127A1
128B1
129D1
130C1
131D1
132D1
133C1
134A1
135B1
136D1
137C1
138D1
139D1
140B1
141B1
142D1
143C1
144D1
145A1
146D1
147A1
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Pastlit

Economics 9708 · Price stability — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

148B1
149B1
150B1
151C1
152D1
153A1
154D1
155B1
156A1
157C1
158C1
159C1
160C1
161C1
162A1
163C1
164D1
165B1
166A1
167C1
168D1
169B1
170C1
171D1
172C1
173A1
174C1
175C1
176A1
177C1
178C1
179C1
180B1
181D1
182D1
183B1
184B1
185D1
186C1
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188C1
189C1
190C1
191C1
192C1
193C1
194D1
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Pastlit

Economics 9708 · Price stability — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

197C1
198C1
199A1
200D1
201C1
202D1
203D1
204D1
205C1
206C1
207A1
208A1
209A1
210B1
211A1
212C1
213C1
214C1
215A1
216D1
217B1
218B1
219C1
220B1
221D1
222B1
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225D1
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Another paper, or another topic

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Paper 1232 questionsPaper 2questions comingPaper 337 questionsPaper 4questions coming

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Questions as text

Q1 · The table shows the weights used over three years in the UK consumer price index 9708/11 Oct/Nov 2005

24 The table shows the weights used over three years in the UK consumer price index. 2001 2002 2003 food 116 114 109 motoring expenditure 140 141 146 housing 205 199 203 leisure goods 49 48 48 What can be deduced from the table? A Housing was a bigger proportion of the average UK household’s spending in 2003 than in 2002. B The average UK household ate less in 2003 than in 2001. C The average UK household spent more on motoring in 2003 than in 2001. D The price of leisure goods remained unchanged between 2002 and 2003.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2005

Q2 · The data given below refers to money supply and prices in the years 2001 and 2004 in four… 9708/11 Oct/Nov 2005

25 The data given below refers to money supply and prices in the years 2001 and 2004 in four countries A, B, C and D. Between 2001 and 2004, in which country was the rate of inflation the highest? 2001 2004 money supply price index money supply price index ($ million) (2000 = 100) ($ million) (2000 = 100) A 69 104 78 153 B 65 112 120 247 C 70 101 213 157 D 172 105 360 210

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2005

Q3 · A government announces that it has achieved its target of 2.5 % inflation per annum and… 9708/11 Oct/Nov 2005

26 A government announces that it has achieved its target of 2.5 % inflation per annum and that it expects to maintain it. How might such an announcement reduce inflationary pressure? A by encouraging the government to reduce its spending B by putting downward pressure on the country’s exchange rate C by putting pressure on the central bank to reduce interest rates D by reducing workers’ expectations of future inflation

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2005

Q4 · The table shows the year-on-year percentage changes for a country's consumer price index… 9708/11 May/June 2006

24 The table shows the year-on-year percentage changes for a country's consumer price index from 1999 to 2005. year % change 1999 18.0 2000 11.7 2001 8.6 2002 4.6 2003 4.9 2004 6.1 2005 4.5 Which statement about the price level is correct? A It fell over the first half of the period. B It was at its highest at the start of the period. C It was at its lowest at the end of the period. D It was at its lowest at the start of the period.

1 marks

Answer: D

This question in 9708/11 May/June 2006

Q5 · What is most likely to cause demand-pull inflation? 9708/11 May/June 2006

25 What is most likely to cause demand-pull inflation? A an increase in indirect taxes B an increase in interest rates C a reduction in direct taxes D a reduction in the money supply

1 marks

Answer: C

This question in 9708/11 May/June 2006

Q6 · Increased international competition leads to a worsening in a country’s current account… 9708/11 May/June 2006

27 Increased international competition leads to a worsening in a country’s current account balance. In the absence of any offsetting factors, how is this likely to affect domestic inflation and the exchange rate? inflation exchange rate A increase appreciate B increase depreciate C decrease appreciate D decrease depreciate

1 marks

Answer: D

This question in 9708/11 May/June 2006

Q7 · The diagram shows rates of inflation as measured by the Consumer Price Index (CPI)… 9708/11 Oct/Nov 2006

24 The diagram shows rates of inflation as measured by the Consumer Price Index (CPI) between 1997 and 2004. services and goods CPI inflation % year on year 5 services 4 3 2 1 goods 0 –1 –2 –3 –4 –5 1997 1998 1999 2000 2001 2002 2003 2004 Which conclusion can be drawn from this data? A The prices of goods fell in 1999. B The prices of goods rose between 2000 and 2001. C The prices of services fell between 2002 and 2004. D Between 1997 and 2004, services cost more than goods.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2006

Q8 · The table shows a country’s rate of inflation for four years 9708/11 Oct/Nov 2006

25 The table shows a country’s rate of inflation for four years. rate of inflation year % 2000 4.0 2001 3.0 2002 2.5 2003 2.0 What fell between 2000 and 2003? A average prices B the cost of living C the exchange rate D the value of money

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2006

Q9 · What is not a possible cause of cost-push inflation? 9708/11 Oct/Nov 2006

26 What is not a possible cause of cost-push inflation? A an increase in firms’ profit margins B an increase in the supply of money C an increase in trade union power D an increase in world oil prices

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2006

Q10 · The table shows the retail prices index for four countries for years 2 and 3 9708/11 May/June 2007

24 The table shows the retail prices index for four countries for years 2 and 3. (Year 1 index = 100 for all countries.) Which country had a higher rate of inflation in year 2 than year 3? country year 2 index year 3 index A 100 115 B 110 132 C 120 144 D 130 150

1 marks

Answer: D

This question in 9708/11 May/June 2007

Q11 · Which combination is likely to result from demand-pull inflation? 9708/11 May/June 2007

25 Which combination is likely to result from demand-pull inflation? balance of trade profits A worsening rising B improving rising C worsening falling D improving falling

1 marks

Answer: A

This question in 9708/11 May/June 2007

Q12 · What would be likely to increase inflation in an economy? 9708/11 May/June 2007

26 What would be likely to increase inflation in an economy? A an increase in consumer saving B an increase in interest rates C an increase in labour productivity D an increase in taxes on imports

1 marks

Answer: D

This question in 9708/11 May/June 2007

Q13 · In the UK in the summer of 2002 the Euro was worth £0.62 9708/11 May/June 2007

29 In the UK in the summer of 2002 the Euro was worth £0.62. In the summer of 2003 the Euro was worth £0.72. How was this change likely to have affected the UK? A higher demand for imports B higher imported inflation C higher priced exports D higher unemployment

1 marks

Answer: B

This question in 9708/11 May/June 2007

Q14 · A country experienced an annual inflation rate of 4 % for three successive years 9708/11 Oct/Nov 2007

25 A country experienced an annual inflation rate of 4 % for three successive years. Which statement is correct for the three-year period? A The price level rose by 12 %. B The price level rose by more than 12 %. C The real value of money rose by 12 %. D The real value of money rose by more than 12 %.

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2007

Q15 · What would be likely to decrease inflation in an economy? 9708/11 Oct/Nov 2007

26 What would be likely to decrease inflation in an economy? A an increase in consumer spending B an increase in employment C an increase in labour productivity D an increase in taxes on imports

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2007

Q16 · A country’s Consumer Price Index increased from 100 to 200 over a five-year period 9708/11 May/June 2008

24 A country’s Consumer Price Index increased from 100 to 200 over a five-year period. What can be deduced from this? A The economy experienced creeping inflation. B The standard of living halved. C The cost of living fell by 50 %. D The purchasing power of money halved.

1 marks

Answer: D

This question in 9708/11 May/June 2008

Q17 · Before 1999 the Brazilian government did not have a desired target rate of inflation 9708/11 May/June 2008

25 Before 1999 the Brazilian government did not have a desired target rate of inflation. From 1999 it set target rates within an upper and lower boundary. The diagram shows the rate of inflation between 1994 and 2003 and the target rate between 1999 and 2003. Inflation and inflation targets in Brazil, 1994 to 2003 916 % 30 government target 25 and range 20 rate of inflation 15 10 5 0 1994 95 96 97 98 99 2000 01 02 03 What can be concluded from the diagram? A The Brazilian government achieved its target in each year from 1999 to 2003. B The inflation target was continuously reduced. C The lowest level of inflation was achieved when an inflation target was used. D The inflation rate was more stable after inflation targets were introduced.

1 marks

Answer: D

This question in 9708/11 May/June 2008

Q18 · The figures were taken from the consumer price indices of retail prices for three… 9708/11 Oct/Nov 2008

24 The figures were taken from the consumer price indices of retail prices for three countries. country 2006 2007 X 100 120 Y 140 150 Z 90 99 Between 2006 and 2007, what is correct? A Country X has the highest growth in the purchasing power of money. B Country Y has the highest growth in the purchasing power of money. C Country Z has the lowest rate of inflation. D Country Y has the lowest rate of inflation.

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2008

Q19 · What is correct about the causes of inflation? 9708/11 Oct/Nov 2008

25 What is correct about the causes of inflation? A Cost-push inflation can be caused by a rising exchange rate. B Cost-push inflation can be caused by lower indirect taxes. C Demand-pull inflation can be caused by a rising exchange rate. D Demand-pull inflation can be caused by lower direct taxes.

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2008

Q20 · What is the average weighted price change illustrated by the table below? 9708/11 May/June 2009

24 What is the average weighted price change illustrated by the table below? percentage of income price change product spent on product % P 10 +8 Q 15 +6 R 25 +4 S 50 –9 A 9.0 % B 7.2 % C 4.5 % D –1.8 %

1 marks

Answer: D

This question in 9708/11 May/June 2009

Q21 · The diagram shows the annual rate of inflation in a country between 2000 and 2003 9708/11 May/June 2009

25 The diagram shows the annual rate of inflation in a country between 2000 and 2003. 10 8 6 rate of inflation % 4 2 0 2000 2001 2002 2003 year Which statement is true of the period 2000 to 2003? A The cost of living fell. B The price level rose. C The Retail Prices Index fell. D The value of money rose.

1 marks

Answer: B

This question in 9708/11 May/June 2009

Q22 · The graphs show consumer prices and employment for Ireland 9708/11 Oct/Nov 2009

24 The graphs show consumer prices and employment for Ireland. 4 3 consumer prices % increase on a 2 year earlier 1 0 2002 03 04 05 06 07 7.0 6.0 unemployment as % of 5.0 labour force 4.0 2002 03 04 05 06 07 What can be concluded from the graphs? A Between 2003 and 2004, unemployment and prices moved in the same direction. B Prices were at their lowest in 2004. C Prices rose continuously over the period. D The number of unemployed workers fell over the period.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2009

Q23 · What may cause cost-push inflation? 9708/11 Oct/Nov 2009

25 What may cause cost-push inflation? A an appreciation of the exchange rate B a higher level of consumption C an increase in labour productivity D an increase in trade union power

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2009

Q24 · What may cause cost-push inflation? 9708/12 Oct/Nov 2009

23 What may cause cost-push inflation? A an appreciation of the exchange rate B a higher level of consumption C an increase in labour productivity D an increase in trade union power

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2009

Q25 · The graphs show consumer prices and employment for Ireland 9708/12 Oct/Nov 2009

24 The graphs show consumer prices and employment for Ireland. 4 3 consumer prices % increase on a 2 year earlier 1 0 2002 03 04 05 06 07 7.0 6.0 unemployment as % of 5.0 labour force 4.0 2002 03 04 05 06 07 What can be concluded from the graphs? A Between 2003 and 2004, unemployment and prices moved in the same direction. B Prices were at their lowest in 2004. C Prices rose continuously over the period. D The number of unemployed workers fell over the period.

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2009

Q26 · The average consumer divides his expenditure between food, accommodation and clothing in… 9708/11 May/June 2010

24 The average consumer divides his expenditure between food, accommodation and clothing in the ratio 5 : 3 : 2. During the course of a year, the price of food rises by 10 %, the price of accommodation remains constant and the price of clothing falls by 5 %. What is the increase in the Consumer Price Index over the year? A 2.5 % B 4 % C 5 % D 6 %

1 marks

Answer: B

This question in 9708/11 May/June 2010

Q27 · Which statement about inflation is correct? 9708/11 May/June 2010

25 Which statement about inflation is correct? A Cost-push inflation is likely to occur when the government increases its expenditure. B Demand-pull inflation is likely to occur when the country’s exchange rate appreciates. C The Quantity Theory of Money predicts that changes in money supply can cause inflation. D When inflation is unanticipated real values remain unchanged.

1 marks

Answer: C

This question in 9708/11 May/June 2010

Q28 · The table shows a country’s rate of inflation for four years 9708/11 May/June 2010

26 The table shows a country’s rate of inflation for four years. rate of inflation year % 2005 4.0 2006 3.0 2007 2.5 2008 2.0 What fell between 2005 and 2008? A average prices B the cost of living C the exchange rate D the value of money

1 marks

Answer: D

This question in 9708/11 May/June 2010

Q29 · The average consumer divides his expenditure between food, accommodation and clothing in… 9708/12 May/June 2010

23 The average consumer divides his expenditure between food, accommodation and clothing in the ratio 5 : 3 : 2. During the course of a year, the price of food rises by 10 %, the price of accommodation remains constant and the price of clothing falls by 5 %. What is the increase in the Consumer Price Index over the year? A 2.5 % B 4 % C 5 % D 6 %

1 marks

Answer: B

This question in 9708/12 May/June 2010

Q30 · Which statement about inflation is correct? 9708/12 May/June 2010

24 Which statement about inflation is correct? A Cost-push inflation is likely to occur when the government increases its expenditure. B Demand-pull inflation is likely to occur when the country’s exchange rate appreciates. C The Quantity Theory of Money predicts that changes in money supply can cause inflation. D When inflation is unanticipated real values remain unchanged.

1 marks

Answer: C

This question in 9708/12 May/June 2010

Q31 · The table shows a country’s rate of inflation for four years 9708/12 May/June 2010

25 The table shows a country’s rate of inflation for four years. rate of inflation year % 2005 4.0 2006 3.0 2007 2.5 2008 2.0 What fell between 2005 and 2008? A average prices B the cost of living C the exchange rate D the value of money

1 marks

Answer: D

This question in 9708/12 May/June 2010

Q32 · The average consumer divides his expenditure between food, accommodation and clothing in… 9708/13 May/June 2010

22 The average consumer divides his expenditure between food, accommodation and clothing in the ratio 5 : 3 : 2. During the course of a year, the price of food rises by 10 %, the price of accommodation remains constant and the price of clothing falls by 5 %. What is the increase in the Consumer Price Index over the year? A 2.5 % B 4 % C 5 % D 6 %

1 marks

Answer: B

This question in 9708/13 May/June 2010

Q33 · Which statement about inflation is correct? 9708/13 May/June 2010

23 Which statement about inflation is correct? A Cost-push inflation is likely to occur when the government increases its expenditure. B Demand-pull inflation is likely to occur when the country’s exchange rate appreciates. C The Quantity Theory of Money predicts that changes in money supply can cause inflation. D When inflation is unanticipated real values remain unchanged.

1 marks

Answer: C

This question in 9708/13 May/June 2010

Q34 · The table shows a country’s rate of inflation for four years 9708/13 May/June 2010

24 The table shows a country’s rate of inflation for four years. rate of inflation year % 2005 4.0 2006 3.0 2007 2.5 2008 2.0 What fell between 2005 and 2008? A average prices B the cost of living C the exchange rate D the value of money

1 marks

Answer: D

This question in 9708/13 May/June 2010

Q35 · The table shows the percentage price changes in some items in the UK Consumer Price Index… 9708/11 Oct/Nov 2010

24 The table shows the percentage price changes in some items in the UK Consumer Price Index (CPI) in the year to 1 June 2006. item % change in price rents, electricity and gas 9.0 education 4.7 transport 4.0 restaurants and hotels 3.2 health services 2.9 The increase in the overall CPI over the same period was 2.5 %. What can be concluded from the data above? A The CPI is not an accurate measure of inflation. B Some prices must have fallen. C The average price increase of other items was less than 2.5 %. D The real value of money rose by more than 2.5 %.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2010

Q36 · In Year 1 the price of a barrel of oil increased from $60 to $110 9708/11 Oct/Nov 2010

25 In Year 1 the price of a barrel of oil increased from $60 to $110. In Year 2 there was a further increase to $115 a barrel. Assume that oil price changes have an immediate impact on the general level of prices. What will be the effect of the changes in the oil price on a country’s Consumer Price Index and on its inflation rate in Year 2 compared with Year 1? effect on the effect on the Consumer Price Index rate of inflation A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2010

Q37 · The table shows the percentage price changes in some items in the UK Consumer Price Index… 9708/12 Oct/Nov 2010

24 The table shows the percentage price changes in some items in the UK Consumer Price Index (CPI) in the year to 1 June 2006. item % change in price rents, electricity and gas 9.0 education 4.7 transport 4.0 restaurants and hotels 3.2 health services 2.9 The increase in the overall CPI over the same period was 2.5 %. What can be concluded from the data above? A The CPI is not an accurate measure of inflation. B Some prices must have fallen. C The average price increase of other items was less than 2.5 %. D The real value of money rose by more than 2.5 %.

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2010

Q38 · In Year 1 the price of a barrel of oil increased from $60 to $110 9708/12 Oct/Nov 2010

25 In Year 1 the price of a barrel of oil increased from $60 to $110. In Year 2 there was a further increase to $115 a barrel. Assume that oil price changes have an immediate impact on the general level of prices. What will be the effect of the changes in the oil price on a country’s Consumer Price Index and on its inflation rate in Year 2 compared with Year 1? effect on the effect on the Consumer Price Index rate of inflation A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2010

Q39 · The table shows the percentage price changes in some items in the UK Consumer Price Index… 9708/13 Oct/Nov 2010

23 The table shows the percentage price changes in some items in the UK Consumer Price Index (CPI) in the year to 1 June 2006. item % change in price rents, electricity and gas 9.0 education 4.7 transport 4.0 restaurants and hotels 3.2 health services 2.9 The increase in the overall CPI over the same period was 2.5 %. What can be concluded from the data above? A The CPI is not an accurate measure of inflation. B Some prices must have fallen. C The average price increase of other items was less than 2.5 %. D The real value of money rose by more than 2.5 %.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2010

Q40 · In Year 1 the price of a barrel of oil increased from $60 to $110 9708/13 Oct/Nov 2010

24 In Year 1 the price of a barrel of oil increased from $60 to $110. In Year 2 there was a further increase to $115 a barrel. Assume that oil price changes have an immediate impact on the general level of prices. What will be the effect of the changes in the oil price on a country’s Consumer Price Index and on its inflation rate in Year 2 compared with Year 1? effect on the effect on the Consumer Price Index rate of inflation A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2010

Q41 · The table shows inflation rates, unemployment rates and changes in money wage rates… 9708/11 May/June 2011

23 The table shows inflation rates, unemployment rates and changes in money wage rates between 2008 and 2009 for a number of countries. inflation unemployment money wages country % % % France +0.2 9.4 +3.0 Germany +0.2 8.3 +2.7 UK +1.8 7.8 +2.5 US –0.3 9.4 +2.5 What can be concluded from the table? A On average, those in employment in the UK had an increase in real incomes. B The same number of people were unemployed in the US and France. C The same product would have the same price in France and Germany. D Unemployment was highest where inflation was highest.

1 marks

Answer: A

This question in 9708/11 May/June 2011

Q42 · The diagram compares the inflation rates of Paraguay and Argentina between 1950 and 2005 9708/11 May/June 2011

24 The diagram compares the inflation rates of Paraguay and Argentina between 1950 and 2005. 120 100 key 80 inflation Paraguay 60 (%) Argentina 40 20 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 What can be concluded about inflation rates in the two countries in the period 1950 to 2005? A Argentina’s prices fell rapidly between 1992 and 1995. B Argentina stabilised its price level between 1973 and 1992. C Paraguay was always more successful than Argentina at controlling its inflation rate. D Paraguay was most successful at controlling its inflation rate between 1962 and 1970.

1 marks

Answer: D

This question in 9708/11 May/June 2011

Q43 · Over a period of a year, the annual rate of inflation falls from 10 % to 6 % 9708/11 May/June 2011

25 Over a period of a year, the annual rate of inflation falls from 10 % to 6 %. Which statement is correct? A The cost of living has increased. B The purchasing power of money has increased. C There has been a reduction in the Retail Price Index. D The standard of living has increased.

1 marks

Answer: A

This question in 9708/11 May/June 2011

Q44 · The table shows inflation rates, unemployment rates and changes in money wage rates… 9708/12 May/June 2011

22 The table shows inflation rates, unemployment rates and changes in money wage rates between 2008 and 2009 for a number of countries. inflation unemployment money wages country % % % France +0.2 9.4 +3.0 Germany +0.2 8.3 +2.7 UK +1.8 7.8 +2.5 US –0.3 9.4 +2.5 What can be concluded from the table? A On average, those in employment in the UK had an increase in real incomes. B The same number of people were unemployed in the US and France. C The same product would have the same price in France and Germany. D Unemployment was highest where inflation was highest.

1 marks

Answer: A

This question in 9708/12 May/June 2011

Q45 · The diagram compares the inflation rates of Paraguay and Argentina between 1950 and 2005 9708/12 May/June 2011

23 The diagram compares the inflation rates of Paraguay and Argentina between 1950 and 2005. 120 100 key 80 inflation Paraguay 60 (%) Argentina 40 20 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 What can be concluded about inflation rates in the two countries in the period 1950 to 2005? A Argentina’s prices fell rapidly between 1992 and 1995. B Argentina stabilised its price level between 1973 and 1992. C Paraguay was always more successful than Argentina at controlling its inflation rate. D Paraguay was most successful at controlling its inflation rate between 1962 and 1970.

1 marks

Answer: D

This question in 9708/12 May/June 2011

Q46 · Over a period of a year, the annual rate of inflation falls from 10 % to 6 % 9708/12 May/June 2011

24 Over a period of a year, the annual rate of inflation falls from 10 % to 6 %. Which statement is correct? A The cost of living has increased. B The purchasing power of money has increased. C There has been a reduction in the Retail Price Index. D The standard of living has increased.

1 marks

Answer: A

This question in 9708/12 May/June 2011

Q47 · The table shows inflation rates, unemployment rates and changes in money wage rates… 9708/13 May/June 2011

21 The table shows inflation rates, unemployment rates and changes in money wage rates between 2008 and 2009 for a number of countries. inflation unemployment money wages country % % % France +0.2 9.4 +3.0 Germany +0.2 8.3 +2.7 UK +1.8 7.8 +2.5 US –0.3 9.4 +2.5 What can be concluded from the table? A On average, those in employment in the UK had an increase in real incomes. B The same number of people were unemployed in the US and France. C The same product would have the same price in France and Germany. D Unemployment was highest where inflation was highest.

1 marks

Answer: A

This question in 9708/13 May/June 2011

Q48 · The diagram compares the inflation rates of Paraguay and Argentina between 1950 and 2005 9708/13 May/June 2011

22 The diagram compares the inflation rates of Paraguay and Argentina between 1950 and 2005. 120 100 key 80 inflation Paraguay 60 (%) Argentina 40 20 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 What can be concluded about inflation rates in the two countries in the period 1950 to 2005? A Argentina’s prices fell rapidly between 1992 and 1995. B Argentina stabilised its price level between 1973 and 1992. C Paraguay was always more successful than Argentina at controlling its inflation rate. D Paraguay was most successful at controlling its inflation rate between 1962 and 1970.

1 marks

Answer: D

This question in 9708/13 May/June 2011

Q49 · Over a period of a year, the annual rate of inflation falls from 10 % to 6 % 9708/13 May/June 2011

23 Over a period of a year, the annual rate of inflation falls from 10 % to 6 %. Which statement is correct? A The cost of living has increased. B The purchasing power of money has increased. C There has been a reduction in the Retail Price Index. D The standard of living has increased.

1 marks

Answer: A

This question in 9708/13 May/June 2011

Q50 · The table shows the annual percentage change in an index of prices 9708/11 Oct/Nov 2011

24 The table shows the annual percentage change in an index of prices. country 2008 2009 China 6.3 –1.2 Pakistan 24.3 11.2 Saudi Arabia 10.9 10.7 United States 5.6 –1.4 What can be concluded from the table? A Prices were lowest in the United States in both 2008 and 2009. B Prices were most stable in Saudi Arabia. C The fall in inflation between 2008 and 2009 was greater in China than Saudi Arabia. D The price of all products sold by Chinese firms fell in 2009.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2011

Q51 · Which combination is likely to result from demand-pull inflation? 9708/11 Oct/Nov 2011

25 Which combination is likely to result from demand-pull inflation? balance of trade profits A improving falling B improving rising C worsening falling D worsening rising

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2011

Q52 · The average consumer divides his expenditure between food, clothing, accommodation and… 9708/12 Oct/Nov 2011

24 The average consumer divides his expenditure between food, clothing, accommodation and transport in the ratio 2 : 1 : 4 : 3. During the course of a year, the price of food falls by 2 %, the price of clothing increases by 4 %, the price of accommodation increases by 10 % and the price of transport remains constant. Assuming that the weights of a price index reflect the expenditure of the average consumer, what is the increase in the index over the year? A 2.5 % B 4 % C 10 % D 12 %

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2011

Q53 · At the start of 2009, a worker earned $100 a week 9708/12 Oct/Nov 2011

25 At the start of 2009, a worker earned $100 a week. In 2009, the Retail Price Index (RPI) rose 4 % and his average wage rose 7 %. In 2010, the RPI fell 3 % and his wage fell 2 %. What happened to his real wage between the start of 2009 and the end of 2010? A It fell by less than 5 %. B It fell by more than 5 %. C It rose by less than 5 %. D It rose by more than 5 %.

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2011

Q54 · The table shows the annual percentage change in an index of prices 9708/13 Oct/Nov 2011

22 The table shows the annual percentage change in an index of prices. country 2008 2009 China 6.3 –1.2 Pakistan 24.3 11.2 Saudi Arabia 10.9 10.7 United States 5.6 –1.4 What can be concluded from the table? A Prices were lowest in the United States in both 2008 and 2009. B Prices were most stable in Saudi Arabia. C The fall in inflation between 2008 and 2009 was greater in China than Saudi Arabia. D The price of all products sold by Chinese firms fell in 2009.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2011

Q55 · Which combination is likely to result from demand-pull inflation? 9708/13 Oct/Nov 2011

23 Which combination is likely to result from demand-pull inflation? balance of trade profits A improving falling B improving rising C worsening falling D worsening rising

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2011

Q56 · In which year did the real value of money rise? 9708/11 May/June 2012

24 In which year did the real value of money rise? Price Index year (base year 2001) A 2002 100 B 2003 104 C 2004 104 D 2005 103

1 marks

Answer: D

This question in 9708/11 May/June 2012

Q57 · Before 1999 the Brazilian government did not have a desired target rate of inflation 9708/11 May/June 2012

26 Before 1999 the Brazilian government did not have a desired target rate of inflation. From 1999 it set target rates within an upper and lower boundary. The diagram shows the rate of inflation between 1994 and 2003 and the target rate between 1999 and 2003. Inflation and inflation targets in Brazil, 1994 to 2003 916 % 30 government target 25 and range 20 rate of inflation 15 10 5 0 1994 95 96 97 98 99 2000 01 02 03 What can be concluded from the diagram? A The Brazilian government achieved its target in each year from 1999 to 2003. B The inflation target was continuously reduced. C The lowest level of inflation was achieved when an inflation target was used. D The inflation rate was more stable after inflation targets were introduced.

1 marks

Answer: D

This question in 9708/11 May/June 2012

Q58 · The figures show the Consumer Price Index (CPI) of a country 9708/12 May/June 2012

24 The figures show the Consumer Price Index (CPI) of a country. (1990 = 100) CPI 2007 200 2008 204 2009 206 2010 209 What can be deduced from the data? A There was hyperinflation between 1990 and 2007. B The rate of inflation rose in 2009. C The rate of inflation in 2008 was 4 %. D The country experienced inflation in each year from 2008 to 2010.

1 marks

Answer: D

This question in 9708/12 May/June 2012

Q59 · In which year did the real value of money rise? 9708/13 May/June 2012

24 In which year did the real value of money rise? Price Index year (base year 2001) A 2002 100 B 2003 104 C 2004 104 D 2005 103

1 marks

Answer: D

This question in 9708/13 May/June 2012

Q60 · The table shows the price indices and weights for the three commodity groups that make up… 9708/13 May/June 2012

25 The table shows the price indices and weights for the three commodity groups that make up the calculation of a country’s consumer price index. commodity index weight group X 400 5 Y 120 3 Z 80 2 By how much has the cost of living increased since the base year? A 52 % B 60 % C 152 % D 520 %

1 marks

Answer: C

This question in 9708/13 May/June 2012

Q61 · Before 1999 the Brazilian government did not have a desired target rate of inflation 9708/13 May/June 2012

26 Before 1999 the Brazilian government did not have a desired target rate of inflation. From 1999 it set target rates within an upper and lower boundary. The diagram shows the rate of inflation between 1994 and 2003 and the target rate between 1999 and 2003. Inflation and inflation targets in Brazil, 1994 to 2003 916 % 30 government target 25 and range 20 rate of inflation 15 10 5 0 1994 95 96 97 98 99 2000 01 02 03 What can be concluded from the diagram? A The Brazilian government achieved its target in each year from 1999 to 2003. B The inflation target was continuously reduced. C The lowest level of inflation was achieved when an inflation target was used. D The inflation rate was more stable after inflation targets were introduced.

1 marks

Answer: D

This question in 9708/13 May/June 2012

Q62 · Which statement about a rise in the general price level in a country is correct? 9708/11 Oct/Nov 2012

24 Which statement about a rise in the general price level in a country is correct? A It is likely to create economic winners and losers in the country. B It is unacceptable to modern governments. C It means that no goods have fallen in price. D It must make the average citizen poorer.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2012

Q63 · The table shows detail of the nominal interest rate and the inflation rate for selected… 9708/11 Oct/Nov 2012

25 The table shows detail of the nominal interest rate and the inflation rate for selected countries in July 2010. nominal country inflation rate interest rate China 2.5 2.9 India 5.7 13.9 Indonesia 7.0 5.0 Japan 0.2 –1.1 Pakistan 12.3 12.7 What can be concluded from this information? A The cost of living was higher in India than in China. B The money rate of interest was higher in Indonesia than in Pakistan. C The real rate of interest was positive in Japan but negative in Pakistan. D The standard of living was higher in Indonesia than in India.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2012

Q64 · The table gives some information on inflation rates, unemployment rates, and changes in… 9708/12 Oct/Nov 2012

23 The table gives some information on inflation rates, unemployment rates, and changes in wages for a number of countries in 2006. annual inflation rate unemployment change in country % rate % wages % Britain +1.9 +5.0 +3.5 Germany +2.1 +11.3 +0.8 Italy +2.1 +7.5 +2.3 Japan +0.5 +4.5 –0.6 Spain +4.0 +8.4 +2.5 What can be concluded from the table about 2006? A Britain had an increase in real incomes. B High wage rises caused high rates of inflation. C The price of an identical product was the same in Germany and Italy. D There were more people unemployed in Spain than in Japan.

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2012

Q65 · The data given below refers to money supply and prices in the years 2006 and 2010 in four… 9708/12 Oct/Nov 2012

25 The data given below refers to money supply and prices in the years 2006 and 2010 in four countries. Between 2006 and 2010, in which country was the rate of inflation the highest? 2006 2010 Country money supply price index money supply price index ($ million) (2005 = 100) ($ million) (2005 = 100) A 69 104 78 153 B 65 112 120 247 C 70 101 213 157 D 172 105 360 210

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2012

Q66 · A sudden rise in the price of imported oil caused the annual rate of inflation in a given… 9708/12 Oct/Nov 2012

26 A sudden rise in the price of imported oil caused the annual rate of inflation in a given period to be higher than expected. What might be a likely result of this? A Borrowers would gain. B Real wages would rise. C The balance of trade would improve. D Unemployment would fall.

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2012

Q67 · The graph shows a country’s average annual inflation rate over a five year period 9708/13 Oct/Nov 2012

25 The graph shows a country’s average annual inflation rate over a five year period. average annual inflation rate (%) 1 2 3 4 5 year What can be concluded about the general price level during the five years? A It fell in only one year. B It fell in only two years. C It rose in only two years. D It was constant in only one year.

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2012

Q68 · The table shows the annual rate of inflation in the UK between 2005 and 2010 measured by… 9708/11 May/June 2013

24 The table shows the annual rate of inflation in the UK between 2005 and 2010 measured by the retail price index (RPI) and the consumer price index (CPI). year RPI (%) CPI (%) 2005 2.8 2.1 2006 3.2 2.3 2007 4.3 2.3 2008 4.0 3.6 2009 –0.5 2.2 2010 4.6 3.6 What is a correct conclusion from the table? A The RPI and the CPI both record a fall at some time in the general price level in the UK. B The RPI and the CPI both show the same direction of change in inflation in each year. C The RPI records a lower rate of total inflation for the whole period than the CPI. D The RPI records a more unstable rate of inflation than the CPI.

1 marks

Answer: D

This question in 9708/11 May/June 2013

Q69 · The diagram shows the annual rate of inflation in a country between 2006 and 2009 9708/11 May/June 2013

25 The diagram shows the annual rate of inflation in a country between 2006 and 2009. 10 8 6 rate of inflation % 4 2 0 2006 2007 2008 2009 year Which statement about the period 2006 to 2009 is correct? A The cost of living fell. B The price level rose. C The Retail Prices Index fell. D The value of money rose.

1 marks

Answer: B

This question in 9708/11 May/June 2013

Q70 · The exchange rate of the Mexican peso against the US$ changed from 10 pesos = 1 US$ to 9… 9708/12 May/June 2013

24 The exchange rate of the Mexican peso against the US$ changed from 10 pesos = 1 US$ to 9 pesos = 1 US$. During the same period, the general price level in Mexico fell by 10% while the US price level remained unchanged. What happened to the nominal and real exchange rate of the peso against the US$? nominal peso real peso exchange rate exchange rate A appreciated appreciated B appreciated unchanged C depreciated depreciated D depreciated unchanged

1 marks

Answer: B

This question in 9708/12 May/June 2013

Q71 · The table shows an index number of prices between 2009 and 2012 9708/12 May/June 2013

25 The table shows an index number of prices between 2009 and 2012. In the base year of 2008, inflation was 2% per annum. What was the first year in which the rate of inflation fell? year price index A 2009 103 B 2010 104 C 2011 104 D 2012 101

1 marks

Answer: B

This question in 9708/12 May/June 2013

Q72 · What will be the probable effect of an increase in indirect taxes on demand-pull… 9708/12 May/June 2013

26 What will be the probable effect of an increase in indirect taxes on demand-pull inflation and on cost-push inflation? demand-pull cost-push inflation inflation A increase increase B increase decrease C decrease decrease D decrease increase

1 marks

Answer: D

This question in 9708/12 May/June 2013

Q73 · A country experienced an annual inflation rate of 2% for four successive years 9708/13 May/June 2013

25 A country experienced an annual inflation rate of 2% for four successive years. Which statement is correct for the four-year period? A The price level rose by 8%. B The price level rose by more than 8%. C The real value of money rose by 8%. D The real value of money rose by more than 8%.

1 marks

Answer: B

This question in 9708/13 May/June 2013

Q74 · In 2010 it was reported that there were concerns when a government kept interest rates… 9708/13 May/June 2013

26 In 2010 it was reported that there were concerns when a government kept interest rates very low despite a threat of inflation. Why might the government’s policy have caused concern at this time? A Low interest rates encourage increased consumer spending. B Low interest rates lead to increased spending on capital equipment. C Low interest rates mean imports will increase. D Low interest rates will cause an increase in the exchange rate.

1 marks

Answer: A

This question in 9708/13 May/June 2013

Q75 · The diagram shows the aggregate demand (AD) and short-run aggregate supply (SRAS) for an… 9708/11 Oct/Nov 2013

24 The diagram shows the aggregate demand (AD) and short-run aggregate supply (SRAS) for an economy with a price level OP. SRAS price P level AD O real output Which combination of events would definitely cause a rise in the general price level? world commodity domestic prices unemployment A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2013

Q76 · It is anticipated that the rate of inflation in a country will continue to rise 9708/11 Oct/Nov 2013

25 It is anticipated that the rate of inflation in a country will continue to rise. What is most likely to increase as a result? A balance of payments surplus B confidence in fixed interest bonds C individuals’ need for cash balances D the real value of money

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2013

Q77 · The diagram illustrates what happens to aggregate demand (AD) and aggregate supply (AS)… 9708/12 Oct/Nov 2013

24 The diagram illustrates what happens to aggregate demand (AD) and aggregate supply (AS) in an economy during a year. AS general P1 price level P AD1 AD O Q Q1 real output What explains the rise in the general price level? A boom in consumer spending B higher taxes on company profits C reduction in government-financed projects D rising costs of raw materials

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2013

Q78 · What would increase both demand-pull and cost-push inflation? 9708/12 Oct/Nov 2013

25 What would increase both demand-pull and cost-push inflation? A an appreciation of a country’s currency B an increase in the cost of borrowing C an increase in the level of its import tariffs D an increase in the price of oil

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2013

Q79 · The graph shows the annual percentage change in the prices of services and in the prices… 9708/13 Oct/Nov 2013

25 The graph shows the annual percentage change in the prices of services and in the prices of goods between 2007 and 2012. 10 8 6 services % annual 4 price change 2 0 2007 2008 2009 2010 2011 2012 –2 goods –4 What can be deduced from the graph? A On average the price of services was higher than the price of goods throughout the period. B The average price of goods was higher in 2012 than in 2010. C The average price of services was higher in 2012 than in 2010. D There was a fall in the general price level between 2008 and 2010.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2013

Q80 · The table shows an index of consumer prices (2005 = 100) for a number of countries for… 9708/11 May/June 2014

25 The table shows an index of consumer prices (2005 = 100) for a number of countries for 2009, 2010 and 2011. 2009 2010 2011 Canada 107.8 108.9 112.0 Greece 111.9 117.2 121.1 India 135.2 151.4 164.8 Japan 100.3 99.6 99.3 Portugal 107.4 108.9 112.9 Switzerland 104.3 104.5 104.7 Which statement about the period 2009 to 2011 is not correct? A Prices fell in Japan. B Prices increased in Switzerland. C Prices rose more in Greece than in India. D Prices rose more in Portugal than in Canada.

1 marks

Answer: C

This question in 9708/11 May/June 2014

Q81 · In what circumstances will money lose its value? 9708/11 May/June 2014

26 In what circumstances will money lose its value? A The economy experiences a period of deflation. B The general level of prices is falling. C The growth of money supply falls below the growth of output. D The rate of inflation is positive.

1 marks

Answer: D

This question in 9708/11 May/June 2014

Q82 · The table shows a country’s rate of inflation for four years 9708/12 May/June 2014

25 The table shows a country’s rate of inflation for four years. rate of inflation year % 2009 4.0 2010 3.0 2011 2.5 2012 2.0 What fell between 2009 and 2012? A average prices B the cost of living C the exchange rate D the value of money

1 marks

Answer: D

This question in 9708/12 May/June 2014

Q83 · What is not a possible cause of cost-push inflation? 9708/12 May/June 2014

26 What is not a possible cause of cost-push inflation? A an increase in firms’ profit margins B an increase in raw material prices C an increase in the supply of money D an increase in trade union power

1 marks

Answer: C

This question in 9708/12 May/June 2014

Q84 · The table shows the changes in the general price level of four countries over three years… 9708/13 May/June 2014

24 The table shows the changes in the general price level of four countries over three years expressed as index numbers. Which country experienced a constant rate of fall in the real value of money? year 1 year 2 year 3 A 100 80 60 B 100 90 81 C 100 108 116 D 100 120 144

1 marks

Answer: D

This question in 9708/13 May/June 2014

Q85 · In Year 1 the price of a barrel of oil increased from $60 to $110 9708/13 May/June 2014

25 In Year 1 the price of a barrel of oil increased from $60 to $110. In Year 2 there was a further increase to $115 a barrel. Assume that oil price changes have an immediate impact on the general level of prices and that their Consumer Price Index weightings remains unchanged. What will be the effect of the changes in the oil price on a country’s Consumer Price Index and on its inflation rate in Year 2 compared with Year 1? effect on the effect on the Consumer Price Index rate of inflation A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: C

This question in 9708/13 May/June 2014

Q86 · The table shows an index of consumer prices (2005 = 100) for a number of countries for… 9708/11 Oct/Nov 2014

25 The table shows an index of consumer prices (2005 = 100) for a number of countries for 2009, 2010 and 2011. Which country experienced the lowest rate of fall in the real value of money between 2009 and 2011? 2009 2010 2011 A Canada 107.8 108.9 112.0 B Japan 100.3 99.6 99.3 C Portugal 107.4 108.9 112.9 D Switzerland 104.3 104.5 104.7

1 marks

This question in 9708/11 Oct/Nov 2014

Q87 · National inflation rates vary widely but they have declined for most countries in recent… 9708/11 Oct/Nov 2014

26 National inflation rates vary widely but they have declined for most countries in recent years. Which combination might best explain this decline in inflation rates? A increased consumer expenditure and tighter control on international trade B increasing international competition and reduced world incomes C low interest rates and expectations of future price increases D protectionist trade measures and a rise in raw material prices

1 marks

This question in 9708/11 Oct/Nov 2014

Q88 · The graph shows the rate of inflation in a country in a 5 year period 9708/12 Oct/Nov 2014

25 The graph shows the rate of inflation in a country in a 5 year period. + rate of inflation 0 % 1 1 2 2 3 4 5 – year What can be concluded from the graph? A The price level fell during two years. B The price level was highest during year 4. C The value of money fell for 5 years. D The value of money rose in 1 year.

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2014

Q89 · Which economic change might contribute to both cost-push and demand-pull inflation? 9708/12 Oct/Nov 2014

28 Which economic change might contribute to both cost-push and demand-pull inflation? A a fall in the exchange rate B a fall in the interest rate C a rise in the productivity of industrial workers D an improvement in the terms of trade

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2014

Q90 · The weighting given to food in the construction of the United Kingdom’s Retail Price… 9708/13 Oct/Nov 2014

23 The weighting given to food in the construction of the United Kingdom’s Retail Price Index fell from 16.7% in 1987 to 11.8% in 2011. What would help to explain this? A The average price of food decreased by 4.9% points between 1987 and 2011. B The demand for food is price inelastic. C The income elasticity of the demand for food is less than one. D There was an increase in the relative price of food over the period.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2014

Q91 · Which statement about inflation is correct? 9708/13 Oct/Nov 2014

25 Which statement about inflation is correct? A Cost-push inflation is likely to occur when the government increases its expenditure. B Demand-pull inflation is likely to occur when the country’s exchange rate appreciates. C The Quantity Theory of Money predicts that changes in money supply can cause inflation. D When inflation is unanticipated real values remain unchanged.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2014

Q92 · A country experienced an annual inflation rate of 4% for three successive years 9708/13 Oct/Nov 2014

26 A country experienced an annual inflation rate of 4% for three successive years. Which statement is correct for the three-year period? A The price level rose by 12%. B The price level rose by more than 12%. C The real value of money rose by 12%. D The real value of money rose by more than 12%.

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2014

Q93 · The table shows the CPI rate of inflation (%) in the US from 2006 to 2013 9708/11 May/June 2015

25 The table shows the CPI rate of inflation (%) in the US from 2006 to 2013. 2006 2007 2008 2009 2010 2011 2012 2013 2.5% 4.1% 0.1% 2.7% 1.5% 3.0% 1.7% 2.0% What can be concluded from the figures about the period 2006 to 2013? A There was one year of constant prices. B There were three years of deflation. C There were only four years of inflation. D There were eight years of rising living costs.

1 marks

Answer: D

This question in 9708/11 May/June 2015

Q94 · How might an increase in the general price level lead to a rise in real household… 9708/11 May/June 2015

26 How might an increase in the general price level lead to a rise in real household expenditure? A by increasing the expectations of further price increases B by increasing the level of real household debts C by increasing the level of real wages D by increasing the spending on exports

1 marks

Answer: A

This question in 9708/11 May/June 2015

Q95 · There is a depreciation in a country’s exchange rate 9708/11 May/June 2015

29 There is a depreciation in a country’s exchange rate. If wage costs remain unchanged, what would be the most likely consequence? A a fall in the rate of inflation B an increase in profits of manufacturing exporters C an increase in unemployment D an outflow of foreign direct investment

1 marks

Answer: B

This question in 9708/11 May/June 2015

Q96 · In an economy with an interest rate of 4% per annum, the rate of inflation falls from 5%… 9708/12 May/June 2015

25 In an economy with an interest rate of 4% per annum, the rate of inflation falls from 5% to 3% per annum. What will be a benefit of this fall? A Menu costs will fall to zero. B People on fixed incomes will be better off in real terms. C Savers will gain in real terms. D The purchasing power of the currency will rise.

1 marks

Answer: C

This question in 9708/12 May/June 2015

Q97 · A country increases its labour productivity in the manufacturing industry 9708/13 May/June 2015

23 A country increases its labour productivity in the manufacturing industry. What is least likely to result from this? A higher economic growth B higher levels of exports of manufacturing C lower inflation D lower wage rates in manufacturing

1 marks

Answer: D

This question in 9708/13 May/June 2015

Q98 · What will be the impact on demand-pull inflation and on cost-push inflation of an… 9708/13 May/June 2015

25 What will be the impact on demand-pull inflation and on cost-push inflation of an increase in indirect taxes? demand-pull cost-push inflation inflation A lower lower B lower raise C raise lower D raise raise

1 marks

Answer: B

This question in 9708/13 May/June 2015

Q99 · At the start of 2009, a worker earned US$ 100 a week 9708/13 May/June 2015

26 At the start of 2009, a worker earned US$ 100 a week. In 2009, the Retail Price Index (RPI) rose by 4% and his average wage rose by 7%. In 2010, the RPI fell by 3% and his wage fell by 2%. What happened to his real wage between the start of 2009 and the end of 2010? A It fell by less than 5%. B It fell by more than 5%. C It rose by less than 5%. D It rose by more than 5%.

1 marks

Answer: C

This question in 9708/13 May/June 2015

Q100 · What is the most likely cause of cost-push inflation in an economy? 9708/11 Oct/Nov 2015

25 What is the most likely cause of cost-push inflation in an economy? A an increase in the exchange rate B an increase in the money supply C an increase in the prices of imports D an increase in the rate of income tax

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2015

Q101 · The table shows the consumer price index (CPI) for a country 9708/11 Oct/Nov 2015

26 The table shows the consumer price index (CPI) for a country. year CPI 1 100 2 110 3 105 4 103 5 108 What can be concluded from the table? A Prices fell continuously from year 2 to year 5. B Prices rose between year 1 and year 5. C Prices rose only from year 1 to year 2. D Prices were at their highest in year 5.

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2015

Q102 · In the absence of offsetting changes, what would be likely to increase if a country’s… 9708/11 Oct/Nov 2015

29 In the absence of offsetting changes, what would be likely to increase if a country’s exchange rate appreciates? A the cost of imported consumer goods B the level of domestic inflation C the rate of unemployment D the volume of manufacturing exports

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2015

Q103 · An economy is experiencing accelerating cost-push inflation 9708/12 Oct/Nov 2015

25 An economy is experiencing accelerating cost-push inflation. Which group is likely to be least concerned by this? A borrowers B consumers C creditors D exporters

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2015

Q104 · The table shows the Consumer Price Index (CPI) for a country 9708/12 Oct/Nov 2015

26 The table shows the Consumer Price Index (CPI) for a country. year CPI 2008 100 2009 104 2010 102 2011 105 2012 108 2013 111 Which statement about the period 2008 to 2013 is correct? A Prices increased each year. B Prices increased fastest in 2011. C The rate of inflation was 2% in 2010. D The smallest rise in prices was in 2013.

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2015

Q105 · In June 2013, the Governor of the Bank of Namibia announced that the Central Bank’s… 9708/13 Oct/Nov 2015

25 In June 2013, the Governor of the Bank of Namibia announced that the Central Bank’s lending rate would remain low as long as inflation remained low. What would not lead to a risk of inflation? A increased output in the mining, manufacturing and construction industries B Namibian dollar depreciation against the currencies of its trading partners C severe weather problems that harm crop production D the Namibian Government’s policy of increased public expenditure

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2015

Q106 · The capital value of a non-interest bearing asset is index-linked 9708/13 Oct/Nov 2015

26 The capital value of a non-interest bearing asset is index-linked. During a period of inflation, how will its money value and its real value change? money value real value A rises rises B rises stays constant C stays constant falls D stays constant stays constant

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2015

Q107 · What is the likely effect on the volume of exports and imports if a country with a fixed… 9708/13 Oct/Nov 2015

28 What is the likely effect on the volume of exports and imports if a country with a fixed exchange rate experiences a higher rate of inflation than its trading partners? exports imports A increase decrease B decrease increase C increase increase D decrease decrease

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2015

Q108 · The table gives data for an economy 9708/12 Feb/March 2016

20 The table gives data for an economy. 2010 2011 2012 2013 2014 Gross Domestic Product (GDP) 200 220 240 300 320 at current prices ($ billion) GDP deflator (price index) 100 109 125 149 154 In which year did real GDP decline compared with the previous year? A 2011 B 2012 C 2013 D 2014

1 marks

Answer: B

This question in 9708/12 Feb/March 2016

Q109 · What always happens when there is an increase in the Consumer Price Index? 9708/12 Feb/March 2016

21 What always happens when there is an increase in the Consumer Price Index? A an increase in consumer expenditure B an increase in the cost of living C a reduction in living standards D a reduction in real disposable income

1 marks

Answer: B

This question in 9708/12 Feb/March 2016

Q110 · In March 2014, Sweden had a change in its Consumer Price Index of –0.6% 9708/12 Feb/March 2016

30 In March 2014, Sweden had a change in its Consumer Price Index of –0.6%. Which combination of policies might the government use to restore price stability? A increase interest rates and increase indirect taxes B increase interest rates and reduce government expenditure C reduce government spending and increase income tax D reduce interest rates and increase government expenditure

1 marks

Answer: D

This question in 9708/12 Feb/March 2016

Q111 · The table shows information about a country whose consumers spend their income on three… 9708/11 May/June 2016

21 The table shows information about a country whose consumers spend their income on three commodities, P, Q and R. index of index of consumers’ commodity prices in prices in expenditure year 1 year 2 in year 1 P 100 160 $100 million Q 100 80 $300 million R 100 100 $100 million Between year 1 and year 2 how has the general level of prices changed? A It has risen by 40%. B It has risen by 10%. C It has remained the same. D It has fallen by 5%.

1 marks

Answer: C

This question in 9708/11 May/June 2016

Q112 · The UK inflation rate as measured by the Consumer Price Index was 5.2% in September 2011 9708/11 May/June 2016

22 The UK inflation rate as measured by the Consumer Price Index was 5.2% in September 2011. In June 2014 the UK inflation rate as measured by the Consumer Price Index was 1.6%. What can definitely be concluded about the period September 2011 to June 2014? A Fixed income earners had increased purchasing power. B Prices were falling. C The rate of price increases was slowing. D The real rate of interest became positive.

1 marks

Answer: C

This question in 9708/11 May/June 2016

Q113 · A country experienced an annual deflation rate of 2% for four successive years 9708/12 May/June 2016

21 A country experienced an annual deflation rate of 2% for four successive years. Which statement is correct for the four-year period? A The price level fell by 8%. B The price level fell by less than 8%. C The real value of money fell by 8%. D The real value of money fell by less than 8%.

1 marks

Answer: B

This question in 9708/12 May/June 2016

Q114 · What must be true if an economy is experiencing inflation? 9708/13 May/June 2016

20 What must be true if an economy is experiencing inflation? A Aggregate demand is increasing. B Aggregate supply is decreasing. C The interest rate is increasing. D The real value of money is decreasing.

1 marks

Answer: D

This question in 9708/13 May/June 2016

Q115 · Suppose the average consumer’s expenditure is divided between bread, meat, milk and… 9708/13 May/June 2016

21 Suppose the average consumer’s expenditure is divided between bread, meat, milk and vegetables in the ratio 4 : 3 : 2 : 1. During the course of a year, the price of bread falls by 10%, the price of meat increases by 20% and the prices of both milk and vegetables increase by 10%. What is the increase in the average price level during the year? A 5% B 7.3% C 10% D 12.5%

1 marks

Answer: A

This question in 9708/13 May/June 2016

Q116 · The table shows the share of a worker’s income spent on three classes of good and the… 9708/11 Oct/Nov 2016

20 The table shows the share of a worker’s income spent on three classes of good and the percentage change in the prices of the goods over a year. share of income change in spent on goods prices of goods clothing 25% +25% food 50% +50% fuel 25% –25% Over the same period the worker’s money income rises by 25%. What happens to the worker’s real income? A It falls by 25%. B It falls by 50%. C It rises by 25%. D It is unchanged.

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2016

Q117 · Over a period of a year, the annual rate of inflation becomes negative 9708/11 Oct/Nov 2016

21 Over a period of a year, the annual rate of inflation becomes negative. Which statement must be correct? A The cost of living has fallen. B The purchasing power of money has fallen. C The standard of living has increased. D There has been an increase in the Consumer Price Index.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2016

Q118 · In 2012, the rate of inflation in Botswana was 7.5% 9708/12 Oct/Nov 2016

20 In 2012, the rate of inflation in Botswana was 7.5%. Person X kept all of their savings in the form of cash while Person Y put their savings into a bank account on which they earned 5.0% interest. What was the effect on the real value of their savings by the end of the year? Person X Person Y A decrease decrease B decrease increase C no change decrease D no change increase

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2016

Q119 · The graph shows the annual percentage change in the prices of services and in the prices… 9708/12 Oct/Nov 2016

21 The graph shows the annual percentage change in the prices of services and in the prices of goods between 2007 and 2012. 10 8 6 services % annual 4 price change 2 0 2007 2008 2009 2010 2011 2012 –2 goods –4 What can be deduced from the graph? A On average the price of services was higher than the price of goods throughout the period. B The average price of goods was higher in 2012 than in 2010. C The average price of services was higher in 2012 than in 2010. D There was a fall in the general price level between 2008 and 2010.

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2016

Q120 · During a period of deflation an economy’s aggregate monetary demand falls 9708/13 Oct/Nov 2016

4 During a period of deflation an economy’s aggregate monetary demand falls. Which function of money explains this fall? A a measure of value B a medium of exchange C a standard for deferred payment D a store of value

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2016

Q121 · An increase in a country’s consumer price index implies an increase in A the cost of… 9708/13 Oct/Nov 2016

20 An increase in a country’s consumer price index implies an increase in A the cost of living. B the rate of inflation. C the standard of living. D the value of money.

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2016

Q122 · The figures in the table were taken from the consumer price indices of retail prices for… 9708/13 Oct/Nov 2016

21 The figures in the table were taken from the consumer price indices of retail prices for three countries. Country 2014 2015 X 100 120 Y 140 150 Z 90 99 Between 2014 and 2015, what is correct? A Country X has the highest growth in the purchasing power of money. B Country Y has the highest growth in the purchasing power of money. C Country Z has the lowest rate of inflation. D Country Y has the lowest rate of inflation.

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2016

Q123 · Relative weights are used in calculating the index of retail prices to reflect the… 9708/12 Feb/March 2017

21 Relative weights are used in calculating the index of retail prices to reflect the different A amounts of money spent by consumers on each good. B levels of prices for each good. C numbers of people buying each good. D rates of change in price of each good over time.

1 marks

Answer: A

This question in 9708/12 Feb/March 2017

Q124 · The diagram shows the long-run aggregate supply (LRAS) curve of an economy 9708/11 May/June 2017

20 The diagram shows the long-run aggregate supply (LRAS) curve of an economy. At which equilibrium level of national income is a balance of trade surplus likely to cause the greatest inflationary increase for the economy? price LRAS level O A B C D real national income

1 marks

Answer: D

This question in 9708/11 May/June 2017

Q125 · A government succeeds in changing a current account deficit into a current account surplus 9708/11 May/June 2017

21 A government succeeds in changing a current account deficit into a current account surplus. Why might this current account surplus increase the country’s inflation rate? A It raises aggregate demand. B It raises production costs. C It reduces the exchange rate. D It reduces the money supply.

1 marks

Answer: A

This question in 9708/11 May/June 2017

Q126 · In recent years an economy has experienced changes in its price level as shown 9708/11 May/June 2017

30 In recent years an economy has experienced changes in its price level as shown. 6 percentage change of 4 price level 2 0 2010 2015 –2 Which government policy is most effective in reversing the trend shown in the price level? A encourage firms to expand production through tax incentives B introduce an incomes policy to directly control wage increases C promote household savings by issuing savings bonds D reduce interest rates and increase money supply

1 marks

Answer: D

This question in 9708/11 May/June 2017

Q127 · Which statement about changing price levels is correct? 9708/12 May/June 2017

20 Which statement about changing price levels is correct? A Anyone on a fixed income has rising real income during deflation. B Government revenue from indirect taxes falls during inflation. C Producers prefer deflation to inflation. D Savers prefer index-linked savings when there is deflation rather than inflation.

1 marks

Answer: A

This question in 9708/12 May/June 2017

Q128 · Which combination of events is most likely to cause inflation? 9708/12 May/June 2017

21 Which combination of events is most likely to cause inflation? exchange rate direct taxes money supply A falling falling falling B falling falling rising C rising rising rising D rising rising falling

1 marks

Answer: B

This question in 9708/12 May/June 2017

Q129 · The table shows the year-on-year percentage changes for a country’s consumer price index… 9708/13 May/June 2017

21 The table shows the year-on-year percentage changes for a country’s consumer price index from 2009 to 2015. year % change 2009 18.0 2010 11.7 2011 8.6 2012 4.6 2013 4.9 2014 6.1 2015 4.5 Which statement about the price level is correct? A It fell over the first half of the period. B It was at its highest at the start of the period. C It was at its lowest at the end of the period. D It was at its lowest at the start of the period.

1 marks

Answer: D

This question in 9708/13 May/June 2017

Q130 · The table shows a country’s consumer price index for March and April 2015 9708/11 Oct/Nov 2017

20 The table shows a country’s consumer price index for March and April 2015. consumer price index March 2015 151.3 April 2015 148.6 Which statement correctly describes what happened between these two months? A There was a decrease in the annual rate of inflation. B There was a decrease in real interest rates. C There was an increase in the purchasing power of money. D There was an increase in the standard of living.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2017

Q131 · What would be likely to increase inflation in an economy? 9708/11 Oct/Nov 2017

21 What would be likely to increase inflation in an economy? A an increase in consumer saving B an increase in interest rates C an increase in labour productivity D an increase in taxes on imports

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2017

Q132 · The table shows the retail prices index for four countries for years 2 and 3 9708/12 Oct/Nov 2017

20 The table shows the retail prices index for four countries for years 2 and 3. (Year 1 index = 100 for all countries.) Which country had a higher rate of inflation in year 2 than year 3? country year 2 index year 3 index A 100 115 B 110 132 C 120 144 D 130 150

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2017

Q133 · What would be likely to decrease inflation in an economy? 9708/13 Oct/Nov 2017

20 What would be likely to decrease inflation in an economy? A a decrease in consumer saving B a decrease in unemployment C an increase in labour productivity D an increase in taxes on imports

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2017

Q134 · What is the average weighted price change illustrated by the table below? 9708/13 Oct/Nov 2017

21 What is the average weighted price change illustrated by the table below? percentage of income price change product spent on product % P 10 +8 Q 15 +6 R 25 +4 S 50 –9 A –1.8% B 4.5% C 7.2% D 9.0%

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2017

Q135 · During one year the national output of a country valued in terms of money prices… 9708/12 Feb/March 2018

21 During one year the national output of a country valued in terms of money prices increased by 8% while the index of the prices of all goods and services produced in the country increased by 3%. By how much did the real national output increase? A 3% B 5% C 8% D 11%

1 marks

Answer: B

This question in 9708/12 Feb/March 2018

Q136 · The table shows the CPI rate of inflation (%) in the United States from 2006 to 2013 9708/12 Feb/March 2018

22 The table shows the CPI rate of inflation (%) in the United States from 2006 to 2013. 2006 2007 2008 2009 2010 2011 2012 2013 2.5% 4.1% 0.1% 2.7% 1.5% 3.0% 1.7% 2.0% What can be concluded from the figures about the period 2006 to 2013? A There was one year of constant prices. B There were three years of deflation. C There were only four years of inflation. D There were eight years of rising living costs.

1 marks

Answer: D

This question in 9708/12 Feb/March 2018

Q137 · What would be certain to cause a fall in a country’s cost of living? 9708/11 May/June 2018

20 What would be certain to cause a fall in a country’s cost of living? A a fall in real incomes B a fall in the inflation rate C a negative inflation rate D a reduction in direct tax rates

1 marks

Answer: C

This question in 9708/11 May/June 2018

Q138 · The table gives figures for household spending in the UK economy between 2008 and 2010 9708/11 May/June 2018

21 The table gives figures for household spending in the UK economy between 2008 and 2010. nominal household real household consumption spending consumption spending (£ million) (£ million) 2008 878 024 878 024 2009 858 242 846 961 2010 900 204 855 302 What can be concluded from the figures? A All households bought more goods and services in 2010 than in 2008. B Households saved more in 2008 than in 2010. C Living standards were lower in 2009 than 2010. D The rate of inflation was higher in 2010 than in 2009.

1 marks

Answer: D

This question in 9708/11 May/June 2018

Q139 · The diagrams show the inflation rate over time in four countries 9708/12 May/June 2018

20 The diagrams show the inflation rate over time in four countries. Which country experiences a falling cost of living throughout the period? A B inflation inflation rate rate + + O time O time – – C D inflation inflation rate rate + + O time O time – –

1 marks

Answer: D

This question in 9708/12 May/June 2018

Q140 · The average consumer divides his expenditure between food, clothing, accommodation and… 9708/13 May/June 2018

20 The average consumer divides his expenditure between food, clothing, accommodation and transport in the ratio 2 : 1 : 4 : 3. During the course of a year, the price of food falls by 2%, the price of clothing increases by 4%, the price of accommodation increases by 10% and the price of transport remains constant. Assuming that the weights of a price index reflect the expenditure of the average consumer, what is the increase in the index over the year? A 2.5% B 4% C 10% D 12%

1 marks

Answer: B

This question in 9708/13 May/June 2018

Q141 · In June 2016 the UK voted to leave the European Union 9708/13 May/June 2018

22 In June 2016 the UK voted to leave the European Union. The table shows what happened to the value of the pound sterling before and after the vote. June Sept £1 = $1.48 £1 = $1.32 The UK is a major trading nation. What is likely to be the short-term impact of the changes in the value of the pound sterling on the UK economy? A increased disinflation B increase in cost-push inflation C more purchasing power of money D reduced demand-pull inflation

1 marks

Answer: B

This question in 9708/13 May/June 2018

Q142 · The diagram shows the change in an economy’s rate of inflation over 4 years 9708/11 Oct/Nov 2018

21 The diagram shows the change in an economy’s rate of inflation over 4 years. inflation rate (%) 0 1 2 3 4 year What happened to the general price level over the 4 years? year 1 year 2 year 3 year 4 A constant constant fell constant B rose constant fell fell C rose rose rose constant D rose rose rose fell

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2018

Q143 · The table shows the consumer price index (CPI) and national output at current prices in… 9708/12 Oct/Nov 2018

20 The table shows the consumer price index (CPI) and national output at current prices in 2014 and 2015 for an economy. national output year CPI at current prices 2014 100 100 2015 120 110 What can be concluded when 2015 is compared with 2014? A Money national output decreased by 10%. B Money national output increased by 20%. C Real national output fell. D Real national output increased.

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2018

Q144 · A country experiences a fall in the consumer price index 9708/13 Oct/Nov 2018

21 A country experiences a fall in the consumer price index. What must be associated with such a fall? A a decrease in average wage rates B a decrease in borrowing C a decrease in consumers’ expenditure D a decrease in the cost of living

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2018

Q145 · A government is faced with rising inflation 9708/12 Feb/March 2019

29 A government is faced with rising inflation. It wishes to reduce inflationary pressure while avoiding a fall in output. Which action is most likely to meet its needs? A an increase in laws to promote competition B an increase in taxation C an increase in the budget surplus D an increase in the exchange rate

1 marks

Answer: A

This question in 9708/12 Feb/March 2019

Q146 · Which effect of inflation is described as redistributive? 9708/11 May/June 2019

21 Which effect of inflation is described as redistributive? A the improvement in the terms of trade B the increased reluctance of people to hold money C the inconvenience of frequently changing prices D the loss of purchasing power of people on fixed incomes

1 marks

Answer: D

This question in 9708/11 May/June 2019

Q147 · An economy is experiencing a period of deflation 9708/12 May/June 2019

25 An economy is experiencing a period of deflation. What must be happening? A The average price level is falling. B The output of the economy is falling. C The rate of inflation is falling. D The real value of money is falling.

1 marks

Answer: A

This question in 9708/12 May/June 2019

Q148 · How is a rate of inflation that is lower than that expected likely to affect lenders and… 9708/13 May/June 2019

19 How is a rate of inflation that is lower than that expected likely to affect lenders and borrowers in an economy? effect on lenders effect on borrowers A beneficial beneficial B beneficial harmful C harmful beneficial D harmful harmful

1 marks

Answer: B

This question in 9708/13 May/June 2019

Q149 · What is likely to be the least effective store of value during a period of rapid… 9708/13 May/June 2019

26 What is likely to be the least effective store of value during a period of rapid inflation? A antique furniture B fixed interest government securities C houses D shares of industrial companies

1 marks

Answer: B

This question in 9708/13 May/June 2019

Q150 · What always happens when there is an increase in the Consumer Price Index? 9708/11 Oct/Nov 2019

26 What always happens when there is an increase in the Consumer Price Index? A an increase in consumer expenditure B an increase in the cost of living C a reduction in living standards D a reduction in real disposable income

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2019

Q151 · Which change in economic circumstances is most likely to lead to a reduction in the rate… 9708/11 Oct/Nov 2019

30 Which change in economic circumstances is most likely to lead to a reduction in the rate of domestic inflation in an economy? A a depreciation in the currency B a reduction in the productivity of labour C a world-wide recession D an increase in direct taxes to finance increased welfare payments

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2019

Q152 · The table shows the annual percentage increases in a country’s consumer prices index (CPI) 9708/12 Oct/Nov 2019

22 The table shows the annual percentage increases in a country’s consumer prices index (CPI). year % change 2015 8.3 2016 6.0 2017 6.0 2018 1.0 Which statement is correct? A Consumer prices, on average, fell throughout the period. B Consumer prices, on average, remained the same in 2016 and 2017. C The general level of consumer prices was at its highest in 2015. D The general level of consumer prices was at its highest in 2018.

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2019

Q153 · The graph shows the rate of inflation for seven countries for 2015 and 2016 9708/13 Oct/Nov 2019

21 The graph shows the rate of inflation for seven countries for 2015 and 2016. 7 6 5 4 3 key 2015 2 2016 1 0 Costa Ecuador India Japan Malaysia Mauritius Thailand Thailand Thailand Rica –1 –2 What can be concluded from this graph? A Prices in Costa Rica rose in 2015 but remained constant in 2016. B Prices in Ecuador and Mauritius were lower in 2016 than in 2015. C Prices in India and Malaysia remained constant in 2016 and 2015. D Prices in Thailand and Japan were lower in 2016 than in 2015.

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2019

Q154 · What must be true if an economy is experiencing inflation? 9708/13 Oct/Nov 2019

25 What must be true if an economy is experiencing inflation? A Aggregate demand is increasing. B Aggregate supply is decreasing. C The interest rate is increasing. D The real value of money is decreasing.

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2019

Q155 · Which statement describes disinflation? 9708/12 Feb/March 2020

26 Which statement describes disinflation? A a fall in the price level B a fall in the rate of inflation C a rise in the value of money D inflation below zero

1 marks

Answer: B

This question in 9708/12 Feb/March 2020

Q156 · A country experienced a significant fall in unemployment but its inflation rate remained… 9708/11 May/June 2020

30 A country experienced a significant fall in unemployment but its inflation rate remained low. What could explain this? A Global competition prevented firms passing on higher costs. B Increased spending on imports had lowered the exchange rate. C There was a low level of spare capacity in the economy. D Wage rates had increased by more than labour productivity.

1 marks

Answer: A

This question in 9708/11 May/June 2020

Q157 · According to US Consumer Prices Index (CPI) statistics, an identical good that cost $100… 9708/12 May/June 2020

23 According to US Consumer Prices Index (CPI) statistics, an identical good that cost $100 in 1913 would cost $2359.60 in 2013. What was the approximate cumulative rate of inflation over the period? A 23% B 230% C 2300% D 23 000%

1 marks

Answer: C

This question in 9708/12 May/June 2020

Q158 · In an economy with an interest rate of 4% per annum, the rate of inflation falls from 5%… 9708/12 May/June 2020

27 In an economy with an interest rate of 4% per annum, the rate of inflation falls from 5% to 3% per annum. What will be a benefit of this fall? A Menu costs will fall to zero. B People on fixed incomes will be better off in real terms. C Savers will gain in real terms. D The purchasing power of the currency will rise.

1 marks

Answer: C

This question in 9708/12 May/June 2020

Q159 · The graph shows the annual percentage change in the prices of services and in the prices… 9708/13 May/June 2020

19 The graph shows the annual percentage change in the prices of services and in the prices of goods between 2007 and 2012. 10 % annual 8 price change 6 services 4 2 0 2007 2008 2009 2010 2011 2012 –2 goods –4 What can be deduced from the graph? A On average the price of services was higher than the price of goods throughout the period. B The average price of goods was higher in 2012 than in 2010. C The average price of services was higher in 2012 than in 2010. D There was a fall in the general price level between 2008 and 2010.

1 marks

Answer: C

This question in 9708/13 May/June 2020

Q160 · The real national income of a country fell by 3% 9708/13 May/June 2020

25 The real national income of a country fell by 3%. What could have caused this? A Money national income fell by 3% when the rate of inflation was 6%. B Money national income fell by 6% when the rate of inflation was 3%. C Money national income rose by 3% when the rate of inflation was 6%. D Money national income rose by 6% when the rate of inflation was 3%.

1 marks

Answer: C

This question in 9708/13 May/June 2020

Q161 · The data shows the consumer prices index (CPI) and an index of money wages in an economy… 9708/11 Oct/Nov 2020

22 The data shows the consumer prices index (CPI) and an index of money wages in an economy during four years. year 1 2 3 4 CPI 100 102 105 110 index of money wages 100 102 107 110 Which statement is not correct? A Inflation was at its greatest between years 3 and 4. B Real wages remained constant between years 1 and 2. C Real wages rose between years 3 and 4. D The rate of inflation increased over the whole period.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2020

Q162 · The government of an open economy with an overvalued currency decides to abandon its… 9708/12 Oct/Nov 2020

26 The government of an open economy with an overvalued currency decides to abandon its fixed exchange rate in favour of a floating exchange rate. Which macroeconomic policy aim is least likely to be met because of this change? A a low inflation rate B a low level of unemployment C a reduced balance of payments deficit D a sustainable rate of economic growth

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2020

Q163 · Under which circumstance would the rate of inflation be most likely to fall? 9708/13 Oct/Nov 2020

19 Under which circumstance would the rate of inflation be most likely to fall? A Government spending increases and society’s marginal propensity to save falls. B Reduced interest rates result in consumers increasing their spending. C The government increases direct taxes and the level of investment falls. D The prices of imported raw materials rise, whilst demand for exports falls.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2020

Q164 · What term relates to a fall in the domestic real value of a currency? 9708/13 Oct/Nov 2020

25 What term relates to a fall in the domestic real value of a currency? A deflation B depreciation C devaluation D inflation

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2020

Q165 · To counter deflation a central bank uses expansionary monetary policy 9708/13 Oct/Nov 2020

27 To counter deflation a central bank uses expansionary monetary policy. What is likely to result? A a higher cost of borrowing B a higher rate of inflation C an appreciation of the exchange rate D an increase in government debt

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2020

Q166 · Which statement about a rise in the general price level in a country is correct? 9708/12 Feb/March 2021

19 Which statement about a rise in the general price level in a country is correct? A It is likely to create economic winners and losers in the country. B It is never acceptable to modern governments. C It means that no goods have fallen in price. D It must make the average citizen poorer.

1 marks

Answer: A

This question in 9708/12 Feb/March 2021

Q167 · The table shows a country’s consumer prices index (CPI) for March and April 2018 9708/12 Feb/March 2021

26 The table shows a country’s consumer prices index (CPI) for March and April 2018. CPI March 2018 151.3 April 2018 148.6 Which statement correctly describes what happened between these two months? A There was a decrease in the annual rate of inflation. B There was a decrease in real interest rates. C There was an increase in the purchasing power of money. D There was an increase in the standard of living.

1 marks

Answer: C

This question in 9708/12 Feb/March 2021

Q168 · The diagram shows the rate of inflation over time in four countries 9708/12 Feb/March 2021

27 The diagram shows the rate of inflation over time in four countries. Which country has a rising real value of money over time? A inflation rate B + C 0 – time D

1 marks

Answer: D

This question in 9708/12 Feb/March 2021

Q169 · Other things being equal, what is most likely to be reduced by falling labour… 9708/12 Feb/March 2021

29 Other things being equal, what is most likely to be reduced by falling labour productivity? A the balance of trade deficit B the internal value of money C the level of unemployment D the rate of domestic inflation

1 marks

Answer: B

This question in 9708/12 Feb/March 2021

Q170 · If the rate of inflation rises from 2% to 20%, which function of money is likely to be… 9708/12 May/June 2021

3 If the rate of inflation rises from 2% to 20%, which function of money is likely to be most affected? A medium of exchange B standard for deferred payment C store of value D unit of account

1 marks

Answer: C

This question in 9708/12 May/June 2021

Q171 · What is correct about the causes of inflation? 9708/12 May/June 2021

22 What is correct about the causes of inflation? A Cost-push inflation can be caused by a rising exchange rate. B Cost-push inflation can be caused by lower indirect taxes. C Demand-pull inflation can be caused by a rising exchange rate. D Demand-pull inflation can be caused by lower direct taxes.

1 marks

Answer: D

This question in 9708/12 May/June 2021

Q172 · What would be certain to cause a fall in a country’s cost of living? 9708/13 May/June 2021

19 What would be certain to cause a fall in a country’s cost of living? A a fall in real incomes B a fall in the inflation rate C a negative inflation rate D a reduction in direct tax rates

1 marks

Answer: C

This question in 9708/13 May/June 2021

Q173 · A sudden rise in the price of imported oil caused the annual rate of inflation in a given… 9708/13 May/June 2021

22 A sudden rise in the price of imported oil caused the annual rate of inflation in a given period to be higher than expected. What might be a likely result of this? A Borrowers would gain. B Real wages would rise. C The balance of trade would improve. D Unemployment would fall.

1 marks

Answer: A

This question in 9708/13 May/June 2021

Q174 · The graph shows inflation rates over 10 years for selected emerging economies 9708/13 May/June 2021

30 The graph shows inflation rates over 10 years for selected emerging economies. 7 inflation % year on year 6 W 5 X 4 Y Z 3 2 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 year Government central banks set target minimum inflation rates before readjusting interest rates to stabilise the economy. If the minimum inflation rate target set by central banks was 4% per year, at which points would they allow interest rates to fall? A W and X B X and Y C Y and Z D Z and W

1 marks

Answer: C

This question in 9708/13 May/June 2021

Question 175 9708/11 Oct/Nov 2021

20 What is disinflation? A a fall in output B a fall in the price level C a fall in the rate of increase of the price level D a fall in the value of national income

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2021

Q176 · A developed country has a price-inelastic demand for oil, all of which it imports 9708/11 Oct/Nov 2021

22 A developed country has a price-inelastic demand for oil, all of which it imports. The oil-producing countries increase the supply of oil. What is likely to happen to the developed country’s rate of inflation and its balance of trade? rate of inflation balance of trade A decreases improves B decreases worsens C increases improves D increases worsens

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2021

Q177 · What is the most likely cause of cost-push inflation in an economy? 9708/11 Oct/Nov 2021

26 What is the most likely cause of cost-push inflation in an economy? A an increase in the exchange rate B an increase in the money supply C an increase in the prices of imports D an increase in the rate of income tax

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2021

Q178 · Which changes are most likely to reduce the accuracy of the consumer prices index (CPI)… 9708/11 Oct/Nov 2021

27 Which changes are most likely to reduce the accuracy of the consumer prices index (CPI) as a measurement of inflation? A A larger sample is used in the household spending survey. B Technology makes it easier for retailers to submit accurate monthly price data. C Households change their spending habits. D The weightings attached to the basket of goods are reviewed more often.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2021

Q179 · Which statement about inflation is correct? 9708/12 Oct/Nov 2021

20 Which statement about inflation is correct? A Inflation will lead to a rise in exports. B Inflation will lead to a rise in real incomes. C Inflation will lead to a rise in the cost of living. D Inflation will lead to a rise in the purchasing power of money.

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2021

Q180 · There is an increase in indirect taxes 9708/12 Oct/Nov 2021

24 There is an increase in indirect taxes. What will be the impact on demand-pull inflation and on cost-push inflation? demand-pull cost-push inflation inflation A fall fall B fall rise C rise fall D rise rise

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2021

Q181 · Which policy would be likely to increase inflation? 9708/13 Oct/Nov 2021

29 Which policy would be likely to increase inflation? A an increase in income tax B an increase in interest rates C limiting the amount banks can lend D raising the level of import tariffs

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2021

Q182 · The diagram shows the annual consumer prices index for Japan over the years 1990–2010… 9708/12 Feb/March 2022

19 The diagram shows the annual consumer prices index for Japan over the years 1990–2010 inclusive. 5 consumer 4 prices 3 index (%) 2 1 0 –1 –2 –3 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 year In which period did Japan experience both inflation at a rate of approximately 2% and deflation at a rate of approximately 2.5%? A 1992–1994 B 1996–1998 C 2006–2008 D 2008–2010

1 marks

Answer: D

This question in 9708/12 Feb/March 2022

Q183 · The table shows a country’s total output and its average price in each of three years 9708/11 May/June 2022

20 The table shows a country’s total output and its average price in each of three years. output price year (millions) ($) 1 10 20 2 12 24 3 13 26 What can be concluded about output? A Nominal output and real output increased at the same rate. B Nominal output rose at a faster rate than real output. C Nominal output rose at an increasing rate. D Real output rose at a constant rate.

1 marks

Answer: B

This question in 9708/11 May/June 2022

Q184 · The aggregate demand (AD) and aggregate supply (AS) diagram shows an economy in… 9708/11 May/June 2022

22 The aggregate demand (AD) and aggregate supply (AS) diagram shows an economy in equilibrium at X. In this economy, a severe shortage of raw materials causes a large rise in their price. The effect of this change is shown by a move to which point? AD3 AS2 AD1 general AD2 AS1 price level C B D A X O real national income

1 marks

Answer: B

This question in 9708/11 May/June 2022

Q185 · Why will a contractionary monetary policy reduce inflation? 9708/11 May/June 2022

29 Why will a contractionary monetary policy reduce inflation? A Banks will lend more. B Consumers will have higher disposable income. C Consumers will pay more tax. D Consumers will save more.

1 marks

Answer: D

This question in 9708/11 May/June 2022

Q186 · The diagram shows the annual inflation rate in an economy 9708/12 May/June 2022

22 The diagram shows the annual inflation rate in an economy. 4 the rate of 3 inflation (%) 2 1 0 –1 –2 2012 2013 2014 2015 2016 2017 2018 year What can be deduced from the graph? A The price of goods and services fell between 2013 and 2014. B Disinflation took place between 2014 and 2015. C The purchasing power of money increased between 2014 and 2015. D The cost of living fell from 2016 onwards.

1 marks

Answer: C

This question in 9708/12 May/June 2022

Q187 · What, if decreased, will help to reduce the rate of inflation? 9708/12 May/June 2022

28 What, if decreased, will help to reduce the rate of inflation? A budget deficit B direct taxes C exchange rate D interest rate

1 marks

Answer: A

This question in 9708/12 May/June 2022

Q188 · A household’s income increased by 3% 9708/13 May/June 2022

23 A household’s income increased by 3%. Over the same period, the rate of inflation was also 3%. Which statement is correct? A Both the nominal income of the household and the real income of the household increased by 3%. B The nominal income of the household remained unchanged while the real income of the household increased by 3%. C The nominal income of the household increased by 3% while the real income of the household remained unchanged. D The nominal income of the household increased by 3% while the real income of the household increased by 6%.

1 marks

Answer: C

This question in 9708/13 May/June 2022

Q189 · In 2018, the inflation rate in Argentina was over 100% 9708/13 May/June 2022

25 In 2018, the inflation rate in Argentina was over 100%. Which combination correctly identifies the winners and losers during this period? winners losers A firms selling goods households paying back abroad loans B firms unable to decrease firms paying back loans on real wages fixed monthly repayments C individuals with a high amount households that hold most of debt at a fixed rate of interest of their assets in cash D workers on fixed the retired on fixed wage contracts incomes

1 marks

Answer: C

This question in 9708/13 May/June 2022

Q190 · A country is suffering from severe deflation 9708/13 May/June 2022

30 A country is suffering from severe deflation. What is most likely to prevent the deflation from worsening? A increasing income tax to help reduce the government’s budget deficit B increasing interest rates to encourage more saving C increasing transfer payments to reduce inequality of income D revaluing the currency to bring in more revenue from exports

1 marks

Answer: C

This question in 9708/13 May/June 2022

Q191 · What is a likely consequence of inflation? 9708/14 May/June 2022

23 What is a likely consequence of inflation? A Fixed-income earners gain more than those whose income is gained from the ownership of property. B Real wages rise more than money wages. C The assets of creditors decrease in value at the expense of those of debtors. D The domestic purchasing power of money increases.

1 marks

Answer: C

This question in 9708/14 May/June 2022

Q192 · The diagram shows an aggregate demand (AD) and an aggregate supply (AS) curve 9708/14 May/June 2022

24 The diagram shows an aggregate demand (AD) and an aggregate supply (AS) curve. AS price level AD O national output There is a sustained rise in the prices of imported raw materials on which the economy depends. Assuming AD remains independent of AS, what are the most likely effects on the economy? AS price level A decreases falls B increases falls C decreases rises D increases rises

1 marks

Answer: C

This question in 9708/14 May/June 2022

Q193 · Assuming the demand for oil is price-inelastic, what will be the effect on demand-pull… 9708/11 Oct/Nov 2022

19 Assuming the demand for oil is price-inelastic, what will be the effect on demand-pull inflation and on cost-push inflation in an oil-importing country of an increase in the world price of oil? effect on demand-pull effect on cost-push inflation inflation A increase increase B increase reduce C reduce increase D reduce reduce

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2022

Q194 · Which effect of inflation is described as redistributive? 9708/12 Oct/Nov 2022

21 Which effect of inflation is described as redistributive? A the improvement in the terms of trade B the deterioration in the balance of trade C the inconvenience of frequently changing prices D the loss of purchasing power for people on fixed incomes

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2022

Q195 · During a period of deflation an economy’s aggregate monetary demand falls 9708/13 Oct/Nov 2022

2 During a period of deflation an economy’s aggregate monetary demand falls. Which function of money explains this fall? A a measure of value B a medium of exchange C a standard for deferred payment D a store of value

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2022

Q196 · Which statement about changing price levels is correct? 9708/13 Oct/Nov 2022

26 Which statement about changing price levels is correct? A Anyone on a fixed income has rising real income during deflation. B Government revenue from indirect taxes falls during inflation. C Producers prefer deflation to inflation. D Savers prefer index-linked savings when there is deflation rather than inflation.

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2022

Q197 · What would be likely to decrease inflation in an economy? 9708/13 Oct/Nov 2022

27 What would be likely to decrease inflation in an economy? A a decrease in consumer saving B a decrease in unemployment C an increase in labour productivity D an increase in taxes on imports

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2022

Q198 · Which change in economic circumstances is most likely to lead to a reduction in the rate… 9708/13 Oct/Nov 2022

28 Which change in economic circumstances is most likely to lead to a reduction in the rate of domestic inflation in an economy? A a depreciation in the currency B a reduction in the productivity of labour C a worldwide recession D an increase in direct taxes to finance increased welfare payments

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2022

Q199 · The graph shows a country’s average annual inflation rate over a five-year period 9708/12 Feb/March 2023

19 The graph shows a country’s average annual inflation rate over a five-year period. average annual inflation rate (%) 0 year 1 2 3 4 5 What can be concluded about the general price level during the five years? A It fell in only one year. B It fell in only two years. C It rose in only two years. D It was constant in only one year.

1 marks

Answer: A

This question in 9708/12 Feb/March 2023

Q200 · In an economy, wages and prices are both rising but wages are rising faster 9708/12 Feb/March 2023

20 In an economy, wages and prices are both rising but wages are rising faster. Which features are likely to exist in this economy? cost-push rise in real inflation incomes A no no B no yes C yes no D yes yes

1 marks

Answer: D

This question in 9708/12 Feb/March 2023

Q201 · The table shows GDP indices for a country over a three-year period 9708/12 Feb/March 2023

29 The table shows GDP indices for a country over a three-year period. year 1 year 2 year 3 real GDP 100 105 106 money GDP 100 107 115 Inflation and economic growth are two macroeconomic policy objectives. Which row gives a correct assessment of the country’s achievement of these two objectives over the period? rate of rate of inflation economic growth A cannot tell positive B declining cannot tell C positive declining D rising negative

1 marks

Answer: C

This question in 9708/12 Feb/March 2023

Q202 · Which group is most likely to suffer during high inflation? 9708/11 May/June 2023

17 Which group is most likely to suffer during high inflation? A borrowers B importers C producers D fixed wage earners

1 marks

Answer: D

This question in 9708/11 May/June 2023

Q203 · If a country is experiencing a period of high inflation, which groups will benefit the… 9708/12 May/June 2023

24 If a country is experiencing a period of high inflation, which groups will benefit the most from this? companies that fixed income those with export the majority earners high debts of their output A yes yes no B no yes yes C yes no no D no no yes

1 marks

Answer: D

This question in 9708/12 May/June 2023

Q204 · Supply-side policies can be used to correct cost-push inflation 9708/12 May/June 2023

29 Supply-side policies can be used to correct cost-push inflation. Which policy would best achieve this aim in the long run? A allowing trade unions to maintain work practices irrespective of productivity B encouraging workers to work extra hours for extra pay C increasing total labour supply by employing more unskilled workers D supporting the replacement of labour-manned machines by the use of robots

1 marks

Answer: D

This question in 9708/12 May/June 2023

Q205 · Which statement best describes the consumer prices index (CPI)? 9708/11 Oct/Nov 2023

19 Which statement best describes the consumer prices index (CPI)? A It is a measure of changes in the spending patterns of the average household. B It is a measure of changes in the standard of living of the average household. C It is a measure of the average change in prices of a basket of goods and services over time. D It is a measure of the level of prices of all goods and services.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2023

Q206 · Under which conditions will nominal GDP and real GDP increase at the same rate in an… 9708/11 Oct/Nov 2023

23 Under which conditions will nominal GDP and real GDP increase at the same rate in an economy? rate of change of rate of change of national output general price level (% per annum) (% per annum) A 0 –2 B 0 +2 C +2 0 D +2 +2

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2023

Q207 · Over a period of a year, the annual rate of inflation becomes negative 9708/11 Oct/Nov 2023

27 Over a period of a year, the annual rate of inflation becomes negative. Which statement must be correct? A The cost of living has fallen. B The purchasing power of money has fallen. C The standard of living has increased. D There has been an increase in the Consumer Price Index.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2023

Q208 · An economy is experiencing accelerating cost-push inflation 9708/11 Oct/Nov 2023

30 An economy is experiencing accelerating cost-push inflation. Which group is likely to be least concerned by this? A borrowers B consumers C creditors D exporters

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2023

Q209 · Which combination is possible for an economy experiencing zero inflation? 9708/12 Oct/Nov 2023

21 Which combination is possible for an economy experiencing zero inflation? average average nominal wages real wages A falling falling B falling rising C rising falling D unchanging rising

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2023

Q210 · The graph shows the rate of inflation in Japan from April 2020 to February 2021 9708/12 Oct/Nov 2023

22 The graph shows the rate of inflation in Japan from April 2020 to February 2021. 0.4 0.3 0.2 inflation 0.2 0.1 0.1 0.1 rate 0 0 –0.2 –0.4 –0.4 –0.4 –0.6 –0.6 –0.8 –1 –0.9 –1.2 –1.2 Apr May June July Aug Sept Oct Nov Dec Jan Feb 2020 2021 Over which period did disinflation occur in Japan? A July 2020 to February 2021 B July 2020 to September 2020 C October 2020 to December 2020 D October 2020 to February 2021

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2023

Q211 · The graph shows the rate of inflation for seven countries for 2015 and 2016 9708/13 Oct/Nov 2023

23 The graph shows the rate of inflation for seven countries for 2015 and 2016. 7 6 5 4 3 key 2015 2 2016 1 0 Costa Ecuador India Japan Malaysia Mauritius Thailand Thailand Thailand Rica –1 –2 What can be concluded from this graph? A Prices in Costa Rica rose in 2015 but remained constant in 2016. B Prices in Ecuador and Mauritius were lower in 2016 than in 2015. C Prices in India and Malaysia remained constant in 2016 and 2015. D Prices in Thailand and Japan were lower in 2016 than in 2015.

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2023

Q212 · What is least likely to cause a simultaneous increase in demand-pull and cost-push… 9708/12 Feb/March 2024

16 What is least likely to cause a simultaneous increase in demand-pull and cost-push inflation? A depreciation of currency B increased import tariffs C decreased spending on infrastructure D increased wages

1 marks

Answer: C

This question in 9708/12 Feb/March 2024

Q213 · The table gives the value of the price index of an economy in two years 9708/12 May/June 2024

16 The table gives the value of the price index of an economy in two years. year price index 1 60 2 120 What can be concluded about the period? A Nominal income doubled. B Real income doubled. C The cost of living doubled. D The standard of living doubled.

1 marks

Answer: C

This question in 9708/12 May/June 2024

Q214 · What causes a rise in cost-push inflation? 9708/12 May/June 2024

17 What causes a rise in cost-push inflation? A a fall in the rate of income tax B a rise in the rate of income tax C a depreciation of the exchange rate D an appreciation of the exchange rate

1 marks

Answer: C

This question in 9708/12 May/June 2024

Q215 · The diagram shows the effect on the average price level when aggregate demand (AD)… 9708/13 May/June 2024

16 The diagram shows the effect on the average price level when aggregate demand (AD) increases from AD1 to AD2. average LRAS price level P2 P1 AD2 AD1 O real GDP Which statement relating to this change in aggregate demand is correct? A Nominal GDP has increased. B Nominal GDP is unchanged. C Real GDP has increased. D Real GDP has fallen.

1 marks

Answer: A

This question in 9708/13 May/June 2024

Q216 · The table shows the Consumer Prices Index (CPI) for a country 9708/11 Oct/Nov 2024

15 The table shows the Consumer Prices Index (CPI) for a country. year CPI 2008 100 2009 104 2010 102 2011 105 2012 108 2013 111 Which statement about the period 2008 to 2013 is correct? A Prices increased each year. B Prices increased fastest in 2011. C The rate of inflation was 2% in 2010. D The smallest rise in prices was in 2013.

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2024

Q217 · What is most likely to cause the price level to rise? 9708/11 Oct/Nov 2024

16 What is most likely to cause the price level to rise? An increase in A productivity of labour. B raw material prices. C income taxes. D subsidies paid to producers.

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2024

Q218 · The table shows the values of Consumer Prices Index (CPI) and a worker’s salary in 2022… 9708/12 Oct/Nov 2024

15 The table shows the values of Consumer Prices Index (CPI) and a worker’s salary in 2022 and 2023. CPI 2022 100 CPI 2023 110 worker’s salary 2022 $20 000 worker’s salary 2023 $25 000 What is the real value of the worker’s salary in 2023 compared with 2022? A $18 182 B $22 727 C $25 000 D $27 500

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2024

Q219 · In an economy with an interest rate of 4% per annum, the rate of inflation falls from 5%… 9708/12 Oct/Nov 2024

19 In an economy with an interest rate of 4% per annum, the rate of inflation falls from 5% to 3% per annum. What will be a benefit of this fall? A Menu costs will fall to zero. B People on fixed incomes will be better off in real terms. C Savers will gain in real terms. D The purchasing power of the currency will rise.

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2024

Q220 · A country experienced an annual deflation rate of 2% for four successive years 9708/13 Oct/Nov 2024

15 A country experienced an annual deflation rate of 2% for four successive years. Which statement is correct for the four-year period? A The price level fell by 8%. B The price level fell by less than 8%. C The real value of money fell by 8%. D The real value of money fell by less than 8%.

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2024

Q221 · Governments may have price stability as a macroeconomic objective 9708/12 Feb/March 2025

16 Governments may have price stability as a macroeconomic objective. What is meant by price stability? A All equilibrium prices are maintained in the long run. B Demand-pull inflation cancels out any cost-push inflation. C Only disinflation is present in the economy in the long run. D Prolonged periods of inflation and deflation are avoided.

1 marks

Answer: D

This question in 9708/12 Feb/March 2025

Q222 · Which statement correctly describes an increase in real GDP? 9708/11 May/June 2025

16 Which statement correctly describes an increase in real GDP? A Nominal GDP rising faster than nominal income. B Nominal GDP rising faster than the rate of inflation. C The rate of inflation rising faster than aggregate demand. D The rate of inflation rising faster than nominal income.

1 marks

Answer: B

This question in 9708/11 May/June 2025

Q223 · The price of a pack of six eggs rises from $1.00 to $1.32 over a year 9708/11 May/June 2025

20 The price of a pack of six eggs rises from $1.00 to $1.32 over a year. Consumer prices, as measured by the consumer price index, rise by 10% over the same period. What is the real price of a pack of six eggs at the end of the year? A $1.00 B $1.10 C $1.20 D $1.32

1 marks

Answer: C

This question in 9708/11 May/June 2025

Q224 · The table shows the change in the value of UK sterling over a three-month period 9708/11 May/June 2025

30 The table shows the change in the value of UK sterling over a three-month period. June Sept £1 = $1.38 £1 = $1.32 What is likely to be the short-term impact of the change in the value of UK sterling on the UK economy? A increased disinflation B increase in cost-push inflation C more purchasing power of money D reduced demand-pull inflation

1 marks

Answer: B

This question in 9708/11 May/June 2025

Q225 · Price stability can be said to occur if the measured value of the consumer prices index… 9708/12 May/June 2025

16 Price stability can be said to occur if the measured value of the consumer prices index (CPI) is unchanged during the year. Which statement is correct? A For price stability to occur, there must be no changes in prices of any products. B For price stability to occur, the number of products whose prices rise must exactly match the number whose prices fall. C If some prices rise and others fall, there cannot be price stability. D Different weightings of items used in the calculation of CPI mean that price stability can occur in many ways.

1 marks

Answer: D

This question in 9708/12 May/June 2025

Q226 · An economy is experiencing a period of deflation 9708/13 May/June 2025

19 An economy is experiencing a period of deflation. What must be happening? A The average price level is falling. B The output of the economy is falling. C The rate of inflation is falling. D The real value of money is falling.

1 marks

Answer: A

This question in 9708/13 May/June 2025

Q227 · The table gives the terms of trade index for a country over three years 9708/13 May/June 2025

29 The table gives the terms of trade index for a country over three years. year 1 year 2 year 3 terms of trade 100 105 112 What is the most likely impact of this change? A there will be a decrease in cost-push inflation B there will be a decrease in living standards C there will be an increase in the budget surplus D there will be an increase in the volume of exports

1 marks

Answer: A

This question in 9708/13 May/June 2025

Q228 · The diagram shows the AD and AS curves for a low income country 9708/11 Oct/Nov 2025

21 The diagram shows the AD and AS curves for a low income country. Oil and gas make up 90% of its exports. The initial equilibrium level of national income is Y1. What is the most likely new equilibrium point if the worldwide prices of oil and gas rise dramatically? AS general price level A B D C AD O Y1 national income

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2025

Q229 · A central bank increases interest rates to reduce inflation 9708/11 Oct/Nov 2025

23 A central bank increases interest rates to reduce inflation. When will this policy be most likely to succeed? A When household spending is inelastic in response to interest rate changes. B When the country has a floating exchange rate that appreciates. C When the government has an increasing budget deficit. D When trade unions demand higher wages to protect the living standards of their members.

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2025

Q230 · A country’s currency depreciates in terms of other currencies 9708/11 Oct/Nov 2025

26 A country’s currency depreciates in terms of other currencies. What would be a consequence of this depreciation? A There would be a decrease in structural unemployment. B There would be a decrease in the volume of exports. C There would be an increase in cost-push inflationary pressure. D There would be an increase in the budget deficit.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2025

Q231 · Under which conditions will real Gross Domestic Product (GDP) grow the fastest? 9708/13 Oct/Nov 2025

18 Under which conditions will real Gross Domestic Product (GDP) grow the fastest? rate of change in rate of change in nominal GDP general price level (% per year) (% per year) A 0 −2 B 0 +2 C +2 −2 D +2 +2

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2025

Q232 · The diagram shows changes in a country’s price level over a number of years 9708/13 Oct/Nov 2025

22 The diagram shows changes in a country’s price level over a number of years. During which period of time did only disinflation occur? 5 price change 4 % 3 2 1 0 2020 2021 2022 2023 2024 2025 –1 year –2 –3 A from the start of 2020 to the end of 2025 B from the start of 2021 to the end of 2022 C from the start of 2021 to the end of 2023 D from the start of 2023 to the end of 2024

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2025