IB Economics HL 3.3.6 Deflation and disinflation Question Bank
Practise IB Economics SL/HL 3.3.6 by applying deflation and disinflation concepts to exam-style questions.
- Syllabus
- First assessment 2022
- Course
- Economics HL
- Level
- HL
Exam points
- identify the relevant model, concept or evidence
- apply the correct subject framework to the question
- evaluate the result using clear evidence and subject terminology
3.3.6—Deflation and disinflation question 1
The following information provides a simplified version of the calculation of a consumer price index (CPI).
In Country A, the rate of inflation is measured by the calculation of a CPI. The index is calculated using the five products which are purchased by citizens of Country A as representative of a "typical basket of goods".
The weighting given to each product is based on the quantities of each product purchased by the average household in Country A per week.
Table 1
Assume that 2015 is the base year for the purpose of calculating the CPI.
Question (a)
(a)
In Country B, the values of the CPI between 2008 and 2012 are given in the following table.
Table 2
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Question (i)
(i)
Using the data in Table 2 to support your answer, identify one year in which Country B experienced deflation and one year in which Country B experienced disinflation.
[ 2 ]
Question (b)
(b)
Using an AD/AS diagram, explain one reason why deflation may lead to a higher level of unemployment.
The following diagram illustrates the annual demand and supply for sugar in Country C.
In order to reduce the consumption of sugar, the government of Country C has decided to impose an indirect tax. As a result, the new market supply curve for sugar is given by the function
Q s=-450+5 P
where Qs is the quantity of sugar supplied, in thousands of tonnes per year, and P is the price of sugar in dollars ($) per tonne.
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