Government and the Macroeconomy · 4 question types
Past paper frequency (2018 to 2024)
This topic accounts for approximately 17% of your exam marks.
Inflation causes (demand-pull vs cost-push), effects on different groups, and measurement appear in almost every series; 8 to 15 marks per paper.
Inflation is a sustained rise in the general level of prices in the economy over time. The rate measures how fast prices are rising as a percentage of the previous period.
Three pieces of the definition that earn marks:
A related concept worth naming:
Deflation is a sustained fall in the general price level, which shows up as a negative inflation rate. It is rare but dangerous: consumers delay purchases while they wait for prices to fall further, so firms cut output and unemployment rises.
A more extreme concept:
Hyperinflation is an extremely high and accelerating inflation rate, typically more than 50% per month. It destroys confidence in the currency; people switch to barter or foreign currencies. Famous historical examples include Weimar Germany in the 1920s and Zimbabwe in 2008.
Defining inflation
What comes up: A 2-mark question asking you to define inflation (e.g. "What is meant by inflation?").
Write (two marks): (1) A sustained (ongoing) rise in prices — not a one-off increase. (2) In the general (average) price level across the economy — not just the price of a single good.
Watch out: Saying "a rise in the price of goods" is too vague and risks scoring zero. Make sure both parts are present: the rise must be persistent, and it must be across all prices on average, not one item.