CAIE IGCSE Economics 4.7.5 Policies to Control Inflation Questions

Practise Cambridge IGCSE Economics by identifying and evaluating fiscal and monetary policies that reduce consumer spending, aggregate demand and inflation.

Exam points

Identify contractionary fiscal and monetary measures that reduce consumer expenditure and inflationary pressure.
Explain how higher taxes, saving measures, interest rates or tighter money supply can lower aggregate demand and prices.
Select or evaluate a policy combination for reducing inflation, considering demand effects and wider macroeconomic trade-offs.

[Maximum number: 1]

A country wishes to reduce the level of inflation.
Which combination of policy measures will be most successful?

policy measure 1

policy measure 2

decrease exchange rates

increase interest rates

decrease interest rates

increase exchange rates

increase government spending

decrease interest rates

increase interest rates

decrease government spending

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CAIE IGCSE Economics 4.7.5 Policies to Control Inflation Questions question 1