Inflation — Paper 1 · IGCSE Economics (9-1) 0987

22 What would not be required in the construction of an index of consumer prices? A the selection of a base year B the selection of a representative range of items C the calculation of average wage levels D the weighting of each item in the index

1 marks

Answer: C

This question in 0987/11 May/June 2020

23 The table gives information about three economic indicators in four countries. rate of rate of rate of inflation interest unemployment % % % country W 1.4 3.4 10.2 country X 3.7 8.7 12.3 country Y 3.6 7.3 14.2 country Z 2.1 6.0 7.7 What may be concluded from this information? A Countries with higher inflation have higher interest rates. B Countries with higher interest rates have lower unemployment. C The country with the lowest inflation had the highest unemployment. D The country with the lowest unemployment had the lowest inflation.

1 marks

Answer: A

This question in 0987/11 May/June 2020

22 What would not be required in the construction of an index of consumer prices? A the selection of a base year B the selection of a representative range of items C the calculation of average wage levels D the weighting of each item in the index

1 marks

Answer: C

This question in 0987/12 May/June 2020

23 Some goods take a greater percentage of a typical household’s total spending than others. How is this accounted for in the construction of a consumer prices index? A by deducting the goods B by giving a weight to the goods C by taking an average of price fluctuations during a year D by using the price elasticity of demand for the goods

1 marks

Answer: B

This question in 0987/12 Oct/Nov 2020

16 An economy has a high rate of inflation. In response to this, its government increases income tax. What is the most likely reason for this increase? A to discourage the consumption of harmful goods B to raise money for government spending C to redistribute income D to reduce total demand

1 marks

Answer: D

This question in 0987/11 May/June 2021

17 Interest rates are sometimes raised to control inflation. Why might this policy be effective? A Consumers may save more. B Government spending may increase. C Investment may be encouraged. D The exchange rate may fall.

1 marks

Answer: A

This question in 0987/11 May/June 2021

19 A country’s inflation rate, measured by the Consumer Prices Index (CPI), was 3% in year 1. Three years later it was 0.8%. What can be concluded from this information? A Prices are falling. B The rate of price increases is falling. C The real rate of interest is negative. D There is increased purchasing power for those on fixed incomes.

1 marks

Answer: B

This question in 0987/11 May/June 2021

20 What will deflation most likely lead to? A a fall in the real value of debts B an increase in the exchange rate C an increase in the rate of interest D an increase in the real purchasing power of money

1 marks

Answer: D

This question in 0987/11 May/June 2021

23 In a year, two changes occurred in a company. Company directors’ salaries increased by 15%. Office workers’ wages increased by 5%. The rate of inflation was 3.4%. What happened to real income? company directors’ office workers’ real income real income A fell fell B fell rose C rose fell D rose rose

1 marks

Answer: D

This question in 0987/11 May/June 2021

26 Gross Domestic Product (GDP) is a better measure of comparative living standards when it is adjusted for the effects of A exports and inflation. B imports and exports. C population change and exports. D population change and inflation.

1 marks

Answer: D

This question in 0987/11 May/June 2021

19 The table shows changes in the Consumer Prices Index (CPI) from the base year, 1, and for the next three years. year 1 2 3 4 CPI 100 101.1 101.8 102.1 Which statement is correct? A Consumer prices were highest in year 3. B The rate of inflation was 2.1% in year 4. C The rate of inflation was highest in year 2. D The rate of inflation was lowest in year 1.

1 marks

Answer: C

This question in 0987/12 May/June 2021

20 What is likely to happen when a country is experiencing deflation? A Consumers delay spending. B Governments raise interest rates. C The level of imports increases. D The real value of money falls.

1 marks

Answer: A

This question in 0987/12 May/June 2021

23 In a year, two changes occurred in a company. Company directors’ salaries increased by 15%. Office workers’ wages increased by 5%. The rate of inflation was 3.4%. What happened to real income? company directors’ office workers’ real income real income A fell fell B fell rose C rose fell D rose rose

1 marks

Answer: D

This question in 0987/12 May/June 2021

16 An economy recorded a second month of deflation. What does this mean? A It was facing a recession. B Price levels were falling. C Total demand was rising. D Unemployment was falling.

1 marks

Answer: B

This question in 0987/12 Oct/Nov 2021

17 What is a cause of demand-pull inflation? A a surplus of skilled labour B higher government expenditure C higher tax rates D lower net exports

1 marks

Answer: B

This question in 0987/12 Oct/Nov 2021

21 How is the rate of inflation measured? A by calculating the change in the price of goods and services from one year to the next B by calculating the real value of all output of goods and services in an economy C by calculating the total number of people willing and able to work but cannot find work D by calculating the total value of exports minus the total value of imports Due to an issue with Question 22, the question has been removed from the question paper.

1 marks

Answer: A

This question in 0987/12 Oct/Nov 2021

5 A government retrains unemployed industrial workers to increase employment opportunities. The policy may have adverse effects on other government macroeconomic aims. What illustrates this situation? A Better skilled workers may increase productivity and improve economic growth. B Increased wage-earning capacity may lead to demand-pull inflation. C More employed workers may reduce government expenditure on benefit payments. D Near full employment may result in a more stable balance of payments.

1 marks

Answer: B

This question in 0987/11 May/June 2022

14 Which combination is necessary for the construction of a consumer prices index? a base year price stability weights A yes yes yes B yes no yes C yes no no D no yes yes

1 marks

Answer: B

This question in 0987/11 May/June 2022

29 Which topic is not included in microeconomics? A consumer demand B economies of scale C forms of competition D inflation

1 marks

Answer: D

This question in 0987/11 May/June 2022

22 A country wishes to reduce the level of inflation. Which combination of policy measures will be most successful? policy measure 1 policy measure 2 A decrease exchange rates increase interest rates B decrease interest rates increase exchange rates C increase government spending decrease interest rates D increase interest rates decrease government spending

1 marks

Answer: D

This question in 0987/12 May/June 2022

18 A central bank reduces interest rates. What would not be a consequence of this action? A a benefit for borrowers receiving loans B a fall in the international value of the currency C a reduction in inflation D an increase in GDP

1 marks

Answer: C

This question in 0987/12 Oct/Nov 2022

22 What is most likely to cause inflation? A a reduction in exports B a reduction in government spending C an increase in the rate of interest D an increase in trade union power

1 marks

Answer: D

This question in 0987/12 Oct/Nov 2022

11 What would be least likely to act as a store of value during a period of rapid inflation? A cash B gold C property D shares

1 marks

Answer: A

This question in 0987/11 May/June 2023

20 The government of a country operating at full employment increases its spending on education and training. How does this affect the likelihood of achieving low inflation in the short run and the long run? short run long run A less likely less likely B less likely more likely C more likely less likely D more likely more likely

1 marks

Answer: B

This question in 0987/11 May/June 2023

23 Which citizens are most likely to benefit in a period of rapid inflation? A citizens who are receiving fixed state benefits B citizens who earn fixed incomes C citizens who have lent money at a fixed rate of interest D citizens who have borrowed money at a fixed rate of interest

1 marks

Answer: D

This question in 0987/11 May/June 2023

11 Savers suffer as inflation rises to 4.4%. Which function of money is most involved in this statement? A means of deferred payments B medium of exchange C store of value D unit of account

1 marks

Answer: C

This question in 0987/12 May/June 2023

19 Which people are most likely to gain at a time of inflation? A companies who sell abroad B foreign tourists visiting the country C those living on their savings D those who are repaying borrowed money

1 marks

Answer: D

This question in 0987/12 May/June 2023

23 What must have happened in a country when it experienced an annual rate of inflation of 100%? A The money supply doubled. B The price level halved. C The purchasing power of money halved. D The real value of money doubled.

1 marks

Answer: C

This question in 0987/12 Oct/Nov 2023

23 Which item is least likely to be included in the Consumer Prices Index (CPI)? A domestic cooking oil B homemade clothes C milk D personal mobile phones

1 marks

Answer: B

This question in 0987/12 May/June 2024

24 A Consumer Prices Index (CPI) consists of four items. The table shows the percentage price change for each item over a period of a year and the weight of each item. Which price change will affect the level of the CPI most? % price change item weight over 1 year A food +5 0.30 B housing +6 0.20 C recreation +3 0.40 D transport +4 0.10

1 marks

Answer: A

This question in 0987/11 May/June 2025

21 An economy that is fully employed is forecast to have an increase in total demand. What is most likely to increase? A the rate of absolute poverty B the government budget deficit C the level of unemployment D the rate of inflation

1 marks

Answer: D

This question in 0987/12 May/June 2025

24 Which changes are likely to lead to the biggest increase in inflation in country X? demand for goods supply of goods and services in and services in country X country X A 5% decrease 5% decrease B 5% decrease 5% increase C 5% increase 5% decrease D 5% increase 5% increase

1 marks

Answer: C

This question in 0987/12 May/June 2025

24 The graph shows changes in the average price level. 5 price 4 change (%) 3 2 1 0 1 2 3 4 5 6 –1 year –2 –3 When did the country experience deflation? A year 2 to year 5 B year 2 to year 3 C year 2 to year 4 D year 4 to year 5

1 marks

Answer: D

This question in 0987/12 Oct/Nov 2025