Price stability
4.6What the syllabus asks of you
- definition of inflation, deflation and disinflation
- measurement of changes in the price level: consumer price index (CPI)
- measurement of changes in the price level: possible difficulties in measurement
- distinction between money values (nominal) and real data
- causes of inflation: cost-push and demand-pull inflation
- consequences of inflation
Drill this topic
Every question on Price stability, untimed, marked as you go.
Make a worksheet
Choose the years and how many questions, then print it with the answers on separate pages.
59 questions
1May / June 2026 · Paper 11 · Q20Show mark scheme →
AFixed income earners had increased purchasing power.
BPrices were falling.
CThe rate of price increases was slowing.
DThe real rate of interest became positive.
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2May / June 2026 · Paper 11 · Q23Show mark scheme →
AConsumers are encouraged to increase spending on imports.
BFirms are encouraged to increase the level of production.
CThe central bank is encouraged to increase the interest rate.
DThe government is encouraged to increase the rate of income tax.
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3May / June 2026 · Paper 13 · Q19Show mark scheme →
Aexchange rate falling; output per worker per hour falling
Bexchange rate falling; output per worker per hour rising
Cexchange rate rising; output per worker per hour falling
Dexchange rate rising; output per worker per hour rising
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4May / June 2026 · Paper 14 · Q19Show mark scheme →
AIt does not take account of changes in the quality of goods and services.
BIt is not possible to include enough prices of different goods and services.
CIt only records consumption patterns for an average household.
DIt does not consider all available goods and services.
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5Oct / Nov 2025 · Paper 13 · Q20Show mark scheme →
Aimports become more competitive
Binterest rates increase
Cthe purchasing power of savings falls
Dthe real value of incomes increases
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6Oct / Nov 2025 · Paper 13 · Q22Show mark scheme →
Afrom the start of 2020 to the end of 2025
Bfrom the start of 2021 to the end of 2022
Cfrom the start of 2021 to the end of 2023
Dfrom the start of 2023 to the end of 2024
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7Oct / Nov 2025 · Paper 14 · Q19Show mark scheme →
Aindirect tax rates
Braw material shortages
Cthe foreign exchange rate
Dtrade union power
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8May / June 2025 · Paper 11 · Q20Show mark scheme →
A$1.00
B$1.10
C$1.20
D$1.32
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9May / June 2025 · Paper 12 · Q16Show mark scheme →
AFor price stability to occur, there must be no changes in prices of any products.
BFor price stability to occur, the number of products whose prices rise must exactly match the number whose prices fall.
CIf some prices rise and others fall, there cannot be price stability.
DDifferent weightings of items used in the calculation of CPI mean that price stability can occur in many ways.
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10May / June 2025 · Paper 13 · Q19Show mark scheme →
AThe average price level is falling.
BThe output of the economy is falling.
CThe rate of inflation is falling.
DThe real value of money is falling.
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11May / June 2025 · Paper 32 · Q22Show mark scheme →
Aif devaluation of the currency leads to a trade surplus
Bif interest rates are increased to control effective demand
Cif the government increases its tax revenue
Dif wage increases are kept in line with productivity
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12Oct / Nov 2024 · Paper 11 · Q15Show mark scheme →
APrices increased each year.
BPrices increased fastest in 2011.
CThe rate of inflation was 2% in 2010.
DThe smallest rise in prices was in 2013.
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13Oct / Nov 2024 · Paper 11 · Q16Show mark scheme →
Aproductivity of labour.
Braw material prices.
Cincome taxes.
Dsubsidies paid to producers.
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14Oct / Nov 2024 · Paper 12 · Q15Show mark scheme →
A$18 182
B$22 727
C$25 000
D$27 500
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15Oct / Nov 2024 · Paper 12 · Q19Show mark scheme →
AMenu costs will fall to zero.
BPeople on fixed incomes will be better off in real terms.
CSavers will gain in real terms.
DThe purchasing power of the currency will rise.
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16Oct / Nov 2024 · Paper 13 · Q15Show mark scheme →
AThe price level fell by 8%.
BThe price level fell by less than 8%.
CThe real value of money fell by 8%.
DThe real value of money fell by less than 8%.
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17Feb / March 2024 · Paper 12 · Q16Show mark scheme →
Adepreciation of currency
Bincreased import tariffs
Cdecreased spending on infrastructure
Dincreased wages
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18Oct / Nov 2023 · Paper 11 · Q19Show mark scheme →
AIt is a measure of changes in the spending patterns of the average household.
BIt is a measure of changes in the standard of living of the average household.
CIt is a measure of the average change in prices of a basket of goods and services over time.
DIt is a measure of the level of prices of all goods and services.
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19Oct / Nov 2023 · Paper 11 · Q27Show mark scheme →
AThe cost of living has fallen.
BThe purchasing power of money has fallen.
CThe standard of living has increased.
DThere has been an increase in the Consumer Price Index.
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20Oct / Nov 2023 · Paper 11 · Q30Show mark scheme →
Aborrowers
Bconsumers
Ccreditors
Dexporters
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21Oct / Nov 2023 · Paper 12 · Q17Show mark scheme →
Adeflation
Bdepreciation
Cappreciation
Dinflation
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22Oct / Nov 2023 · Paper 12 · Q22Show mark scheme →
AJuly 2020 to February 2021
BJuly 2020 to September 2020
COctober 2020 to December 2020
DOctober 2020 to February 2021
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23Oct / Nov 2023 · Paper 13 · Q23Show mark scheme →
APrices in Costa Rica rose in 2015 but remained constant in 2016.
BPrices in Ecuador and Mauritius were lower in 2016 than in 2015.
CPrices in India and Malaysia remained constant in 2016 and 2015.
DPrices in Thailand and Japan were lower in 2016 than in 2015.
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24May / June 2023 · Paper 11 · Q17Show mark scheme →
Aborrowers
Bimporters
Cproducers
Dfixed wage earners
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25May / June 2023 · Paper 12 · Q24Show mark scheme →
Acompanies that export the majority of their output: yes; fixed income earners: yes; those with high debts: no
Bcompanies that export the majority of their output: no; fixed income earners: yes; those with high debts: yes
Ccompanies that export the majority of their output: yes; fixed income earners: no; those with high debts: no
Dcompanies that export the majority of their output: no; fixed income earners: no; those with high debts: yes
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26May / June 2023 · Paper 31 · Q24Show mark scheme →
Ainflation decrease; trade balance no change; unemployment increase
Binflation increase; trade balance improve; unemployment decrease
Cinflation increase; trade balance worsen; unemployment increase
Dinflation decrease; trade balance no change; unemployment decrease
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27May / June 2023 · Paper 33 · Q24Show mark scheme →
Ainflation decrease; trade balance no change; unemployment increase
Binflation increase; trade balance improve; unemployment decrease
Cinflation increase; trade balance worsen; unemployment increase
Dinflation decrease; trade balance no change; unemployment decrease
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28Feb / March 2023 · Paper 12 · Q19Show mark scheme →
AIt fell in only one year.
BIt fell in only two years.
CIt rose in only two years.
DIt was constant in only one year.
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29Feb / March 2023 · Paper 12 · Q20Show mark scheme →
Acost-push inflation: no; rise in real incomes: no
Bcost-push inflation: no; rise in real incomes: yes
Ccost-push inflation: yes; rise in real incomes: no
Dcost-push inflation: yes; rise in real incomes: yes
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30Oct / Nov 2022 · Paper 11 · Q19Show mark scheme →
Aeffect on demand-pull inflation increase; effect on cost-push inflation increase
Beffect on demand-pull inflation increase; effect on cost-push inflation reduce
Ceffect on demand-pull inflation reduce; effect on cost-push inflation increase
Deffect on demand-pull inflation reduce; effect on cost-push inflation reduce
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31Oct / Nov 2022 · Paper 11 · Q30Show mark scheme →
Aexchange rate lower, interest rate higher, money supply higher
Bexchange rate higher, interest rate higher, money supply lower
Cexchange rate higher, interest rate lower, money supply lower
Dexchange rate lower, interest rate lower, money supply higher
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32Oct / Nov 2022 · Paper 12 · Q21Show mark scheme →
Athe improvement in the terms of trade
Bthe deterioration in the balance of trade
Cthe inconvenience of frequently changing prices
Dthe loss of purchasing power for people on fixed incomes
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33Oct / Nov 2022 · Paper 13 · Q26Show mark scheme →
AAnyone on a fixed income has rising real income during deflation.
BGovernment revenue from indirect taxes falls during inflation.
CProducers prefer deflation to inflation.
DSavers prefer index-linked savings when there is deflation rather than inflation.
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34Oct / Nov 2022 · Paper 13 · Q27Show mark scheme →
Aa decrease in consumer saving
Ba decrease in unemployment
Can increase in labour productivity
Dan increase in taxes on imports
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35Oct / Nov 2022 · Paper 13 · Q28Show mark scheme →
Aa depreciation in the currency
Ba reduction in the productivity of labour
Ca worldwide recession
Dan increase in direct taxes to finance increased welfare payments
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36May / June 2022 · Paper 12 · Q22Show mark scheme →
AThe price of goods and services fell between 2013 and 2014.
BDisinflation took place between 2014 and 2015.
CThe purchasing power of money increased between 2014 and 2015.
DThe cost of living fell from 2016 onwards.
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37May / June 2022 · Paper 12 · Q28Show mark scheme →
Abudget deficit
Bdirect taxes
Cexchange rate
Dinterest rate
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38May / June 2022 · Paper 13 · Q23Show mark scheme →
ABoth the nominal income of the household and the real income of the household increased by 3%.
BThe nominal income of the household remained unchanged while the real income of the household increased by 3%.
CThe nominal income of the household increased by 3% while the real income of the household remained unchanged.
DThe nominal income of the household increased by 3% while the real income of the household increased by 6%.
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39May / June 2022 · Paper 13 · Q25Show mark scheme →
Awinners: firms selling goods abroad; losers: households paying back loans
Bwinners: firms unable to decrease real wages; losers: firms paying back loans on fixed monthly repayments
Cwinners: individuals with a high amount of debt at a fixed rate of interest; losers: households that hold most of their assets in cash
Dwinners: workers on fixed wage contracts; losers: the retired on fixed incomes
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40May / June 2022 · Paper 13 · Q30Show mark scheme →
Aincreasing income tax to help reduce the government's budget deficit
Bincreasing interest rates to encourage more saving
Cincreasing transfer payments to reduce inequality of income
Drevaluing the currency to bring in more revenue from exports
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41May / June 2022 · Paper 14 · Q23Show mark scheme →
AFixed-income earners gain more than those whose income is gained from the ownership of property.
BReal wages rise more than money wages.
CThe assets of creditors decrease in value at the expense of those of debtors.
DThe domestic purchasing power of money increases.
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42Feb / March 2022 · Paper 12 · Q19Show mark scheme →
A1992–1994
B1996–1998
C2006–2008
D2008–2010
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43Oct / Nov 2021 · Paper 11 · Q20Show mark scheme →
Aa fall in output
Ba fall in the price level
Ca fall in the rate of increase of the price level
Da fall in the value of national income
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44Oct / Nov 2021 · Paper 11 · Q26Show mark scheme →
Aan increase in the exchange rate
Ban increase in the money supply
Can increase in the prices of imports
Dan increase in the rate of income tax
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45Oct / Nov 2021 · Paper 11 · Q27Show mark scheme →
AA larger sample is used in the household spending survey.
BTechnology makes it easier for retailers to submit accurate monthly price data.
CHouseholds change their spending habits.
DThe weightings attached to the basket of goods are reviewed more often.
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46Oct / Nov 2021 · Paper 12 · Q20Show mark scheme →
AInflation will lead to a rise in exports.
BInflation will lead to a rise in real incomes.
CInflation will lead to a rise in the cost of living.
DInflation will lead to a rise in the purchasing power of money.
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47Oct / Nov 2021 · Paper 12 · Q24Show mark scheme →
Ademand-pull inflation: fall; cost-push inflation: fall
Bdemand-pull inflation: fall; cost-push inflation: rise
Cdemand-pull inflation: rise; cost-push inflation: fall
Ddemand-pull inflation: rise; cost-push inflation: rise
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48Oct / Nov 2021 · Paper 13 · Q29Show mark scheme →
Aan increase in income tax
Ban increase in interest rates
Climiting the amount banks can lend
Draising the level of import tariffs
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49May / June 2021 · Paper 11 · Q23Show mark scheme →
A2016
B2017
C2018
D2019
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50May / June 2021 · Paper 11 · Q27Show mark scheme →
Aan increase in consumer saving
Ban increase in interest rates
Can increase in labour productivity
Dan increase in taxes on imports
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51May / June 2021 · Paper 11 · Q28Show mark scheme →
Aencouraging domestic savings rather than consumption
Bincreasing incentives for business start-ups by lowering profits tax
Clowering interest rates and increasing the money supply
Dpromoting more innovation in technical industries
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52May / June 2021 · Paper 12 · Q22Show mark scheme →
ACost-push inflation can be caused by a rising exchange rate.
BCost-push inflation can be caused by lower indirect taxes.
CDemand-pull inflation can be caused by a rising exchange rate.
DDemand-pull inflation can be caused by lower direct taxes.
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53May / June 2021 · Paper 13 · Q19Show mark scheme →
Aa fall in real incomes
Ba fall in the inflation rate
Ca negative inflation rate
Da reduction in direct tax rates
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54May / June 2021 · Paper 13 · Q22Show mark scheme →
ABorrowers would gain.
BReal wages would rise.
CThe balance of trade would improve.
DUnemployment would fall.
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55May / June 2021 · Paper 13 · Q29Show mark scheme →
Aimposing maximum price levels on basic foodstuffs
Bimproving consumer confidence by reducing sales taxes
Cincreasing income tax rates and increasing government borrowing
Dremoving economic uncertainty and encouraging business investment
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56Feb / March 2021 · Paper 12 · Q19Show mark scheme →
AIt is likely to create economic winners and losers in the country.
BIt is never acceptable to modern governments.
CIt means that no goods have fallen in price.
DIt must make the average citizen poorer.
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57Feb / March 2021 · Paper 12 · Q26Show mark scheme →
AThere was a decrease in the annual rate of inflation.
BThere was a decrease in real interest rates.
CThere was an increase in the purchasing power of money.
DThere was an increase in the standard of living.
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58Feb / March 2021 · Paper 12 · Q27Show mark scheme →
AA
BB
CC
DD
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59Feb / March 2021 · Paper 12 · Q28Show mark scheme →
Aappreciate the exchange rate
Bdecrease the budget deficit
Cincrease the money supply
Dincrease the rate of interest
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