Question 1
The graph shows changes in the average price level.
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
Covered syllabus points
Question 2
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?
item
\% price change
over 1 year
weight
food
+5
0.30
housing
+6
0.20
recreation
+3
0.40
transport
+4
0.10
Question 3
In 2023, the Chinese Government said that it would aim for an economic growth rate of 5% and a steady increase in both exports and imports. It was expected that higher output would be caused mainly by an increase in household spending, although this could also result in inflation. Another aim of the Chinese Government was to keep the unemployment rate at around 5.5%. China has an ageing population and an ageing labour force.
Analyse how an increase in household spending could cause inflation.
Question 4
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.
Question 5
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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