CAIE A-Level Economics 4.6 Price Stability Question Bank

CAIE A-Level Economics 4.6 Price Stability Question Bank
Cambridge International AS & A Level Economics 9708 syllabus for exams in 2026, 2027 and 20282026–2028

Practise distinguishing inflation, deflation and disinflation, calculating CPI and real values and evaluating causes and consequences of changing the general price level.

Exam points

  • interpret CPI or inflation-rate data without confusing disinflation with a falling price level
  • calculate inflation, a real price, income or interest rate from index and nominal data
  • evaluate cost-push or demand-pull causes and effects across consumers, firms and trade

Covered syllabus points

4.6.1—Inflation, deflation and disinflation4.6.2—CPI and price level measurement4.6.3—Nominal vs real data4.6.4—Causes of inflation4.6.5—Consequences of inflation

Question 1

[Maximum number: 6]

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.

Content removed due to copyright restrictions.

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

Question 1(b)

(a)

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

[ 2 ]

Question 1(c)

(b)

'In an attempt to bring about disinflation, the Federal Reserve used a contractionary monetary policy.' Consider whether disinflation is more harmful than deflation.

[ 4 ]

Question 4(a)

[Maximum number: 8]

For your economy or for one that is known to you, explain three causes of inflation and consider which of these causes is likely to be most important in 2025.

Question 5(b)

[Maximum number: 12]

Assess the view that the effects of a high rate of inflation are always more damaging for consumers than for firms.

Question 20

[Maximum number: 1]

The price of a pack of six eggs rises from $ 1.00 to $ 1.32 over a year. Consumer prices, as measured by the consumer price index, rise by 10% over the same period.

What is the real price of a pack of six eggs at the end of the year?

A

$ 1.00

B

$ 1.10

C

$ 1.20

D

$ 1.32

Question 22

[Maximum number: 1]

The diagram shows changes in a country's price level over a number of years.
During which period of time did only disinflation occur?

Figure for Question 22 — CAIE A-Level Economics
A

from the start of 2020 to the end of 2025

B

from the start of 2021 to the end of 2022

C

from the start of 2021 to the end of 2023

D

from the start of 2023 to the end of 2024