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CAIE A-Level Economics 4.6.3 Nominal and Real Data

Practise deflating nominal prices, wages and interest rates with CPI or inflation data and deciding whether purchasing power or real returns have risen or fallen.

Syllabus
2026–2028
Course
Economics 9708
Level
AS

Exam points

  • deflate a nominal value by the relevant price index to express it in base-year prices
  • calculate the approximate real interest rate as nominal interest minus inflation
  • compare money-income growth with inflation to determine the change in real income

4.6.3—Nominal vs real data question 1

[Maximum number: 2]

In 2019, Russia set an aim to quicken its economic expansion - to grow faster than the world as a whole. So far, the plan is off to an uncertain start.

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This has also led to a fall in the value of the exchange rate for the Russian currency, the rouble.

Table 1.1: Russia: Government budget balance as \% of national output

Table 1.1: Russia: Government budget balance as \% of national output

Fig. 1.1: Russia's annual inflation rate, March 2015 to March 2020

Fig. 1.1: Russia's annual inflation rate, March 2015 to March 2020

Source: Trading Economics/Ministry of Finance of the Russian Federation

Using Fig. 1.1

Explain what could have caused real wages in Russia to decline between 2016 and 2018.

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