Inflation — Edexcel Past Paper Questions

Evaluate the possible causes of inflation in the UK.

One of two options in Section B — candidates answered this or the other.

2.1.2 Inflation

In January 2023 the UK prime minister, Rishi Sunak, promised to halve inflation by the end of the year. In July 2023 the Bank of England governor, Andrew Bailey, said: “It is crucial that we… return inflation to its 2% target and provide the environment of price stability in which the UK economy can thrive. This is the best contribution monetary policy can make to the prosperity of the United Kingdom.” Evaluate the possible conflicts between macroeconomic objectives when seeking to control inflation.

One of two options in Section C — candidates answered this or the other.

2.6.4 Conflicts Between Objectives · 2.1.2 Inflation

Evaluate the microeconomic and macroeconomic effects of high levels of inflation. Refer to the UK or any other developed economy in your answer.

One of two options in Section A — candidates answered this or the other.

2.1.2 Inflation

With reference to Figure 1, explain the term ‘inflation rate’.

2.1.2 Inflation

Explain one reason why ‘the fall in the exchange rate of the British pound’ (Extract A, line 21) is likely to increase inflation.

2.1.2 Inflation

With reference to Figure 2, explain how the CPI inflation rate is measured. Refer to the concept of weights in your answer.

2.1.2 Inflation

With reference to Extract B, explain two reasons for the increase in the rate of UK inflation.

2.1.2 Inflation

Discuss the likely economic effects of the high rate of UK inflation on consumers and workers.

2.1.2 Inflation

Evaluate how interest rates are used to control UK inflation.

One of two options in Section B — candidates answered this or the other.

2.6.2 Demand-Side Policies · 2.1.2 Inflation

UK inflation, as measured by the CPI, rose to 10.1% in the 12 months to July 2022, compared to 2.0% in the 12 months to July 2021. Evaluate macroeconomic policies, apart from monetary policy, the UK government could use to reduce inflation.

One of two options in Section C — candidates answered this or the other.

2.1.2 Inflation · 2.6.2 Demand-Side Policies

Examine two reasons for the rise in inflation in the UK. Refer to the information provided in your answer.

2.1.2 Inflation

With reference to the first paragraph of Extract A and Figure 1, explain how the change in the exchange rate of the pound has ‘contributed to rising inflation’ (Extract A, line 4).

2.1.2 Inflation

With reference to Extract A, explain two likely economic effects of the higher rate of UK inflation.

2.1.2 Inflation

With reference to the last paragraph of Extract A and Figure 2, explain one reason why it is necessary to regularly update the CPI basket of goods and services.

2.1.2 Inflation

With reference to Extract C, discuss the potential conflicts between macroeconomic objectives when the central bank attempts to control inflation.

2.6.4 Conflicts Between Objectives · 2.1.2 Inflation

Evaluate the use of interest rate changes as a means of controlling UK inflation.

One of two options in Section B — candidates answered this or the other.

2.6.2 Demand-Side Policies · 2.1.2 Inflation

Evaluate the likely microeconomic and macroeconomic effects of relatively high inflation rates in many African countries.

One of two options in Section B — candidates answered this or the other.

2.1.2 Inflation

Evaluate the likely impact of high inflation on the UK government’s macroeconomic objectives.

One of two options in Section B — candidates answered this or the other.

2.1.2 Inflation · 2.6.1 Macroeconomic Objectives

With reference to the information provided and your own knowledge, examine two factors which might explain the change in the rate of Eurozone inflation as shown in Figure 2.

2.1.2 Inflation

Global oil prices fell from a 2008 peak of $147 a barrel to $27 in 2016. Evaluate the likely macroeconomic consequences of a significant fall in global oil prices.

One of two options in Section C — candidates answered this or the other.

2.1.2 Inflation · 2.3.2 Short-Run Aggregate Supply

With reference to Figure 1, explain the term ‘real income’.

2.1.2 Inflation

With reference to the data, explain two likely reasons for the UK’s falling inflation rate.

2.1.2 Inflation

With reference to Extracts A and B and your own knowledge, discuss whether the MPC should be concerned about the risk of deflation in the UK economy.

2.1.2 Inflation · 2.6.2 Demand-Side Policies

Evaluate whether the MPC has been successful in controlling the UK’s inflation rate since 2011.

One of two options in Section B — candidates answered this or the other.

2.6.2 Demand-Side Policies · 2.1.2 Inflation