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CAIE IGCSE Economics 4.7.4 Consequences of Inflation Questions

Practise Cambridge IGCSE Economics by analysing inflation and deflation effects on real incomes, firms, growth, employment and living standards, then evaluating trade-offs.

Syllabus
2027–2029
Course
Economics 0455

Exam points

  • Explain how inflation or deflation affects real incomes, purchasing power, saving, borrowing and consumer demand.
  • Analyse effects on firms and economies, including costs, competitiveness, investment, growth and employment.
  • Evaluate whether inflation or deflation benefits an economy or its firms, using the stated context and balancing winners and losers.

CAIE IGCSE Economics 4.7.4 Consequences of Inflation Questions question 1

[Maximum number: 8]

Japan has faced significant periods of deflation in recent decades. Despite efforts to stimulate the economy through fiscal policy measures and monetary policy measures, economic growth remains low. Some economists have also argued that the monetary policy used by the central bank is one of the causes of low productivity in Japan.

Discuss whether or not deflation is a problem for an economy.

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