Economics 9708/21 — October/November 2018
Cambridge AS Level · AS Level Data Response and Essays · worked solutions for every part, with the mark scheme
Topics Price Stability · Market Equilibrium and the Price Mechanism · Monetary Policy · Factors of Production · Production Possibility Curves · Price Elasticity of Supply · +3 more
The problems of measuring inflation
Inflation is a simple concept, but price indices are surprisingly hard to construct.
Table 1.1: Changes in the US Consumer Price Index, April 2015–January 2016
| April 2015 | July 2015 | October 2015 | January 2016 | |
|---|---|---|---|---|
| US Consumer Price Index (January 1983 = 100) | 236.0 | 238.1 | 238.0 | 238.1 |
Source: Adapted from www.tradingeconomics.com and US Bureau of Labor Statistics
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Using Table 1.1, calculate the percentage increase in prices in the US between April 2015 and January 2016.
Using examples, explain why the prices of products used to calculate the CPI are given weights.
Explain why the DPI is more likely to be used for measuring the rate of inflation in the future.
Explain how changes in supply might be the cause of a fall in the price of computers at a greater rate than the CPI. Use a diagram to support your answer.
Explain the implications of inflation for borrowers and savers.
Discuss whether monetary policy can operate effectively if inflation is not measured accurately.
The rest of this paper
3 more questions- Q2Factors of Production · Production Possibility Curves20M
- Q3Price Elasticity of Supply · Elasticities of Demand20M
- Q4Protectionism · International Trade and Comparative Advantage20M