Economics 9708 · AS & A Level
Balance of payments
100 practice questions on Balance of payments, with worked solutions and instant marking.
What is always the effect when the Consumer Price Index rises?
Feb/March 2016
Relative weights are applied when calculating the index of retail prices so as to represent the varying
Feb/March 2017
Explain what is used as money in a modern economy. Think about how a rise in the money supply can lead to inflation.
Feb/March 2017
The table presents the CPI rate of inflation (%) in the United States from 2006 to 2013. What conclusion can be drawn from the figures for the period 2006 to 2013?
Feb/March 2018
Use a production possibility curve diagram to show what is expected to happen to the Venezuelan economy from 2014 to 2017.
Feb/March 2018
Which statement gives a description of disinflation?
Feb/March 2020
What does the term ‘real wages’ mean?
Feb/March 2020
Which of the following statements about an increase in the general price level in a country is correct?
Feb/March 2021
The table gives a country’s consumer prices index (CPI) for March and April 2018 (March 151.3; April 148.6). Which statement accurately describes the change between these two months?
Feb/March 2021
The diagram illustrates how the rate of inflation changes over time in four countries. Which country shows a real value of money that is increasing over time?
Feb/March 2021
The table presents the consumer prices index (CPI) for an economy as index numbers (2016 100; 2017 103; 2018 101; 2019 97). Which action is the government most likely to take in order to achieve price stability?
Feb/March 2021
Calculate the rate of inflation in Japan from 2014 to the estimate in 2019.
Feb/March 2021
The diagram illustrates Japan’s annual consumer prices index for the years 1990–2010 inclusive. During which period did Japan have both inflation of about 2% and deflation of about 2.5%?
Feb/March 2022
The graph presents a country’s average yearly inflation rate across a five-year period. What conclusion can be drawn about the overall price level during those five years?
Feb/March 2023
In which situation is currency devaluation most likely to lead to inflation?
Feb/March 2024
Governments may regard price stability as a macroeconomic objective. What does price stability mean?
Feb/March 2025
If prices rise in country X while remaining unchanged in country Y, what is the most likely effect on the internal and external value of money in country X?
Feb/March 2025
Explain how the rate of inflation is measured.
May/June 2007
Explain why an economy may encounter problems if the internal value of its money is unstable.
May/June 2009
Which of the following statements about inflation is correct?
May/June 2010
The table gives a country’s inflation rate over four years. What decreased between 2005 and 2008?
May/June 2010
An average consumer allocates expenditure among food, accommodation and clothing in the ratio 5 : 3 : 2. Over one year, the price of food increases by 10 %, the price of accommodation stays unchanged and the price of clothing decreases by 5 %. By how much does the Consumer Price Index rise over the year?
May/June 2010
Which statement about inflation is right?
May/June 2010
The table gives a country’s inflation rate over four years. What decreased between 2005 and 2008?
May/June 2010
A typical consumer allocates spending among food, accommodation and clothing in the ratio 5 : 3 : 2. Over one year, the price of food increases by 10%, the price of accommodation stays unchanged and the price of clothing decreases by 5%. By how much does the Consumer Price Index rise during the year?
May/June 2010
Which statement concerning inflation is accurate?
May/June 2010
The table displays a country’s inflation rate over four years. What decreased between 2005 and 2008?
May/June 2010
Discuss whether all countries ought to set annual inflation targets of around 3%.
May/June 2010
Explain why unanticipated inflation is often seen as a bigger issue than anticipated inflation.
May/June 2010
If the money supply remains fixed, a fall in economic activity
May/June 2010
The diagram illustrates the link between the rate of increase in wages and the rate of unemployment. What is likely to make the curve in the diagram move downwards and to the left?
May/June 2010
The diagram illustrates the link between the rate at which wages increase and the unemployment rate. Which change would be likely to move the curve in the diagram downward and to the left?
May/June 2010
The table presents inflation rates, unemployment rates and changes in money wage rates from 2008 to 2009 for several countries. What conclusions can be drawn from the table?
May/June 2011
The diagram presents a comparison of inflation rates in Paraguay and Argentina from 1950 to 2005. What conclusion can be drawn about the inflation rates in the two countries during the period 1950 to 2005?
May/June 2011
During a one-year period, the yearly inflation rate decreases from 10 % to 6 %. Which statement is correct?
May/June 2011
The table presents inflation rates, unemployment rates and changes in money wage rates for a number of countries in 2008 and 2009. What conclusion can be drawn from the table?
May/June 2011
The diagram shows a comparison of the inflation rates in Paraguay and Argentina from 1950 to 2005. What conclusion can be drawn about the inflation rates in the two countries over the period 1950 to 2005?
May/June 2011
During a year, the annual inflation rate decreases from 10 % to 6 %. Which statement is correct?
May/June 2011
The table gives inflation rates, unemployment rates and changes in money wage rates between 2008 and 2009 for several countries. What conclusion can be drawn from the table?
May/June 2011
The diagram shows a comparison of the inflation rates in Paraguay and Argentina from 1950 to 2005. What conclusions can be drawn about the inflation rates in the two countries over the period 1950 to 2005?
May/June 2011
Over the course of a year, the annual inflation rate decreases from 10 % to 6 %. Which statement is correct?
May/June 2011
Explain how the effect of a devaluation on the level of economic activity differs from the effect of a deflation.
May/June 2011
Explain why the successful operation of the division of labour relies on the use of money.
May/June 2011
The diagram illustrates the link between the inflation rate and the unemployment rate. What would make the curve FG move to JK?
May/June 2011
During which year did the real value of money increase?
May/June 2012
Prior to 1999, the Brazilian government had no preferred target inflation rate. From 1999 onwards, it introduced target rates with both an upper and a lower limit. The diagram illustrates the inflation rate from 1994 to 2003 and the target rate from 1999 to 2003. What conclusion can be drawn from the diagram?
May/June 2012
The figures present the Consumer Price Index (CPI) for a country. (1990 = 100) What may be deduced from the data?
May/June 2012
In which year did the real value of money increase? (table: year and Price Index base year 2001)
May/June 2012
The table gives the price indices and weights for the three commodity groups used to calculate a country’s consumer price index. By how much has the cost of living risen since the base year?
May/June 2012
Explain the likely impact of the depreciation of the New Turkish Lira on Turkey’s rate of inflation.
May/June 2012
In what way does aggregate demand and aggregate supply analysis account for inflation in the short run?
May/June 2012
The table presents the UK’s annual inflation rate from 2005 to 2010, as measured by the retail price index (RPI) and the consumer price index (CPI). What is a correct conclusion from the table?
May/June 2013
The diagram illustrates the country’s annual inflation rate from 2006 to 2009. Which statement about the 2006 to 2009 period is correct?
May/June 2013
The table presents index numbers of prices for 2009 to 2012. In the base year 2008, inflation was 2% per annum. In which year did the inflation rate first fall?
May/June 2013
A country had an annual inflation rate of 2% over four consecutive years. Which statement is correct for that four-year period?
May/June 2013
In 2010 it was noted that worries arose when a government left interest rates very low even though inflation was a threat. Why may the government’s policy have been a cause for concern at that time?
May/June 2013
The diagram depicts the short-run trade-off between a country’s inflation rate and its national output level. What might make the curve move to the left?
May/June 2013
An economy is experiencing a balance of payments trade surplus together with a high inflation rate. What action would be suitable for a government to take?
May/June 2013
The table presents an index of consumer prices (2005 = 100) for several countries in 2009, 2010 and 2011. Which statement about the period from 2009 to 2011 is not correct?
May/June 2014
Under what conditions will money lose its value?
May/June 2014
The table gives a country’s inflation rate over four years: 2009 4.0%; 2010 3.0%; 2011 2.5%; 2012 2.0%. What decreased between 2009 and 2012?
May/June 2014
The graph illustrates the yearly % changes in the prices of new houses and existing houses in the United Kingdom from 2010 to 2012. What conclusion can be drawn from the graph?
May/June 2014
The table presents how the general price level in four countries changed over three years, with the figures given as index numbers. Which country had a steady rate of decline in the real value of money?
May/June 2014
During Year 1, the cost of a barrel of oil rose from $60 to $110. In Year 2, it climbed again to $115 per barrel. Suppose that any change in oil prices affects the overall price level straight away and that the Consumer Price Index weightings do not change. What effect will the oil price changes have on a country’s Consumer Price Index and on its inflation rate in Year 2 compared with Year 1?
May/June 2014
Using diagrams, explain the difference between demand-pull and cost-push causes of inflation.
May/June 2014
If the velocity of circulation of money remains constant, and real output increases by 2% while the money supply grows by 5%, what is the approximate change in the price level?
May/June 2014
Which combination of changes is most likely, in the short run, to cause a country’s inflation rate to fall?
May/June 2014
During a stated period, money income in an economy rose by 6%. In that same period, the average level of prices increased by 4%. What can be concluded from this?
May/June 2014
If the income velocity of circulation of money stays constant, real output rises by 2%, and the money supply grows by 5%, what is the approximate change in the price level?
May/June 2014
Which mix of changes is most likely, in the short run, to cause a decrease in a country’s inflation rate? (exchange rate; indirect taxes)
May/June 2014
The table presents the CPI inflation rate (%) in the US for 2006 to 2013. What conclusion can be drawn from these figures about the period 2006 to 2013?
May/June 2015
With an interest rate of 4% per annum, inflation drops from 5% to 3% per annum. State one benefit of this drop.
May/June 2015
A government uses monetary policy to control its economy. Which sequence most accurately shows the likely result of a rise in the nation’s inflation rate?
May/June 2015
At the beginning of 2009, a worker was paid US$ 100 each week. Over 2009, the Retail Price Index (RPI) increased by 4% and his average pay increased by 7%. In 2010, the RPI decreased by 3% and his pay decreased by 2%. What happened to his real wage between the start of 2009 and the end of 2010?
May/June 2015
Define each component of aggregate demand and, using a diagram, illustrate how a fall in one of these components may lessen inflationary pressure in an economy.
May/June 2015
The diagram illustrates the link between the inflation rate and the unemployment rate. What would make the curve FG move to JK?
May/June 2015
Why would an inflationary process come to an end if the money supply were kept constant?
May/June 2015
The graphs illustrate the changes in consumer prices and real GDP in a country from 2000 to 2010. Which conclusion can be inferred from the graphs?
May/June 2015
The table presents data for a country in which consumers divide their income between three commodities, P, Q and R. From year 1 to year 2, in what way has the general level of prices changed?
May/June 2016
Using the Consumer Price Index, the UK inflation rate was 5.2% in September 2011. By June 2014, the UK inflation rate measured in this way had fallen to 1.6%. What can be concluded with certainty about the period from September 2011 to June 2014?
May/June 2016
A country recorded an annual deflation rate of 2% over four consecutive years. Which statement is correct for the four-year period?
May/June 2016
What has to be the case if an economy is experiencing inflation?
May/June 2016
Assume that an average consumer’s spending is split among bread, meat, milk and vegetables in the ratio 4 : 3 : 2 : 1. Over a year, the price of bread decreases by 10%, the price of meat rises by 20%, and the prices of both milk and vegetables rise by 10%. By how much does the average price level increase during the year?
May/June 2016
Apply aggregate demand and aggregate supply analysis to distinguish cost-push from demand-pull causes of inflation.
May/June 2016
A government manages to turn a current account deficit into a current account surplus. Why might this current account surplus raise the country’s inflation rate?
May/June 2017
During recent years, an economy has seen its price level change as illustrated. Which government policy would be the most effective in reversing the trend in the price level shown?
May/June 2017
Which statement about variations in price levels is correct?
May/June 2017
Which pair of events is most likely to lead to inflation?
May/June 2017
The table presents the year-on-year percentage changes in a country’s consumer price index between 2009 and 2015. Which statement about the price level is correct?
May/June 2017
The diagram illustrates the output gap, expressed as a percentage of potential GDP, for the US between 1960 and 2014. In which year was the output gap most likely to cause inflation?
May/June 2017
The graphs illustrate consumer prices and unemployment in Ireland from 2002 to 2007. What conclusion can be drawn from the graphs?
May/June 2017
The graphs below illustrate percentage changes in money GDP and consumer prices in a country from 2008 to 2010. What conclusion can be inferred from the graphs?
May/June 2017
The article states that average pay rose by 0.7% for public sector workers, but by 2.5% for private sector workers. State two reasons given in the information for this difference.
May/June 2017
What would be guaranteed to bring about a drop in a country’s cost of living?
May/June 2018
The diagrams illustrate how the inflation rate changes over time in four countries. Which country has a cost of living that decreases throughout the period?
May/June 2018
An average consumer splits expenditure on food, clothing, accommodation and transport in the ratio 2 : 1 : 4 : 3. Over one year, the price of food decreases by 2%, the price of clothing rises by 4%, the price of accommodation rises by 10% and the price of transport stays unchanged. If the weights in a price index are based on the spending pattern of the average consumer, by how much does the index rise over the year?
May/June 2018
Explain the chief reasons for changes in the general price level in your country, or in another country you know well.
May/June 2018
The table presents the yearly inflation rate (consumer prices) and the yearly unemployment rate for five countries in a recent year. What conclusion may be drawn about the connection between inflation and unemployment?
May/June 2018
Consider the ways in which the causes of recession can differ from the causes of inflation.
May/June 2018
Which effect of inflation is referred to as redistributive?
May/June 2019