CAIE A-Level Economics 4.6.2 CPI and Price Level Measurement

CAIE A-Level Economics 4.6.2 CPI and Price Level Measurement
Cambridge International AS & A Level Economics 9708 syllabus for exams in 2026, 2027 and 20282026–2028

Practise calculating and interpreting CPI changes, applying expenditure weights and evaluating how outdated baskets, varied household spending and quality changes affect accuracy.

How this is tested

  • calculate an inflation rate as the percentage change in CPI between the two periods
  • apply expenditure weights so a price change affects the index according to budget share
  • evaluate representativeness through changing baskets, household differences and data lags

Question 1(b)

[Maximum number: 2]

Inflation rate falls in the United States (US), but fears continue over the economic outlook
Americans have been worried about the rate of inflation in the US, especially the increases in food, rent, energy and vehicle prices.

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One economist stated that 'we still expect the impact of the increase in interest rates to push the economy into a mild recession in the first half of 2023’.

Sources: Adapted from 'Economic growth beats forecasts in US', The Times, 27 January 2023 and adapted from 'Inflation rate falls in America - but fears continue over economic outlook', The Times, 28 January 2023

Explain one reason why using the Consumer Price Index (CPI) to measure the inflation rate in the US may not produce an accurate result.