This article is a list of all the inflation questions in the published Edexcel A-Level Economics past papers. We went through all of the Edexcel past papers so you don’t have to. You can find the questions listed below and the answer key at the end of the article. Inflation is the increase in prices over a period of time, which may be driven by economic growth, wage increases, expansionary monetary policy, and the increase in the prices of input goods among other factors.
What is the Edexcel A-Level in Economics?
The Edexcel A-Level in Economics is an economics qualification offered to British students in the final two years of high school. The Economics A-Level covers introductory macroeconomics and microeconomics topics and is intended to prepare students for a university degree in economics or a related field.
There are other exam boards offering the Economics A-Level such as AQA and CIE. However, Edexcel is by far the largest and you’ll find the most study resources for this exam board. Edexcel also has the best answer key guidelines of any exam board, so it’s easiest to study this exam board so you can get the maximum points on your essays.
What is inflation?
Inflation is an increase in prices across an economy over time. Inflation typically causes an increase in the cost of living and may lead to or be caused by an increase in wages. The most common measurement of inflation is the Consumer Price Index (CPI), which calculates the price of a basket of consumer goods and uses it to measure changes in price over time.
There are two different types of inflation – cost-push and demand-pull inflation. Cost-push inflation is when the cost of an input good or several input goods increases, driving up prices for consumer goods. An example of cost-push inflation would be current high levels of inflation, which are driven partly by rising oil prices. Demand-pull inflation occurs when economic growth and rising incomes creates additional demand for goods, leading to price increases.
Question 1: Edexcel A-Level Economics 9EC0 November 2021 Paper 2
GDP at Purchasing Power Parities, Germany and France (nominal, trillions of US dollars) 2010–2017.
(a) From the data in the graph above, which one of the following may be deduced? (1 point)
A France’s rate of inflation was lower than Germany’s in 2017
B Germany’s GDP is smaller than France’s in every year shown
C In every year that France’s GDP fell compared to the previous year,
Germany’s GDP did too
D The GDP of both Germany and France fell between 2015 and 2016
b) Calculate the percentage change in Germany’s nominal GDP from 2016 to 2017. (2 points)
(c) Explain one reason why Purchasing Power Parities are used. (2 points)
Question 2: Edexcel A-Level Economics 9EC0 November 2020 Paper 2
In 2018, the International Monetary Fund (IMF) lent Argentina $57 billion as part of a bailout package to help prevent the country’s government defaulting on its debts. This financial crisis also caused significant capital flight out of Argentina’s economy.
(a) Explain the role of the IMF in providing financial assistance to countries such as Argentina. (4 points)
(b) Which one of the following is most likely to happen to Argentina’s currency value as a result of capital flight, assuming it is operating with a floating exchange rate system? (1 point)
A Appreciation
B Depreciation
C Devaluation
D Revaluation
Question 3: Edexcel A-Level Economics 9EC0 November 2020 Paper 2
The Hong Kong‑Zhuhai‑Macau Bridge is the world’s longest sea bridge. It reduces the journey time from Hong Kong to Zhuhai from 4 hours to just 30 minutes. It cost the equivalent of $18.8 billion and was government funded.
(a) Draw an aggregate demand and aggregate supply diagram to show the likely impact of this new bridge on the price level and real output in the region. (4 points)
(b) Which one of the following would be most likely to solve a negative output gap problem in a domestic economy?
An increase in (1 point)
A government funding to the World Bank
B government spending on foreign aid
C government spending on public transport
D income tax
Question 4: Edexcel A-Level Economics 9EC0 May 2019 Paper 2
Monthly additions to UK credit card lending, £ billions, 2015 – 2017
(a) Which one of the following would be most likely to cause an increase in credit card lending? (1 points)
A A fall in interest rates
B A fall in investment
C An increase in the deficit on the current account of the balance
of payments
D An increase in savings
(b) Using the chart, calculate an index number for additions to credit card lending in March 2017, using January 2016 as the base. You are advised to show your working. (2 points)
(c) Explain one possible link between an increase in credit card lending and the rate of inflation. (2 points)
Question 5: Edexcel A-Level Economics 9EC0 June 2017 Paper 2
The chart below shows UK inflation as measured by the Consumer Prices Index (CPI), 2011 to 2015.
(a) Which one of the following statements is correct about the UK’s inflation record between September 2011 and January 2013? Based on the data shown, the UK experienced: (1 point)
A deflation
B disinflation
C falling average prices
D falling money supply
(b) With reference to the data provided, explain the process of calculating the rate of inflation in the UK using the Consumer Prices Index. Refer to the concept of weights in your answer. (4 points)
Question 6: Edexcel A-Level Economics 9EC0 June 2017 Paper 2
Extract A
European Central Bank disappoints markets with weaker than expected stimulus
Mario Draghi, president of the European Central Bank (ECB), surprised financial markets in November 2015 with a less ambitious package of monetary stimulus than many had anticipated.
The ECB cut its base interest rate by 0.1% to minus 0.3% in order to encourage private banks to lend funds to companies and households rather than deposit them at the central bank. The central bank agreed to extend its €60 billion (£45 billion) monthly bond-buying quantitative easing (QE) programme for a further six months. The ECB’s €1.1 trillion QE scheme had originally been due to end in September 2016.
“We are doing more because it works,” Mr Draghi said. Yet the ECB did not increase the size of its monthly asset purchases and also disappointed those expecting that it would cut interest rates more aggressively.
The euro rose almost 3% against the dollar to $1.08 after the announcement. Italian and Spanish bond yields both jumped by 0.27% to 1.62% and 1.72% respectively. The ECB’s economists reduced their inflation forecasts for the next two years. They now predict consumer prices in the Eurozone rising by just 1% in 2016 and 1.6% in 2017 – still below the central bank’s ceiling of 2%. In November 2015, the inflation rate was just 0.1% and core inflation, excluding volatile items such as fuel and food, dropped to 0.9%.
Mr Draghi stressed again that monetary policy alone could not restore the Eurozone to economic health. He called for looser fiscal policy among member states to support aggregate demand and more rapid implementation of supply-side reforms. “In order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively,” he said.
(a) With reference to Figure 1, calculate the percentage change in the value of the
euro in pounds from the start of 2009 to the start of 2015. (5 points)
(b) 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.
(8 points)
(c) Since mid-2015 the euro has appreciated. Assess the likely impact of an appreciation of the euro on the current account of the balance of payments for Eurozone countries. (10 points)
(d) Discuss the likely success of the ECB’s quantitative easing programme in moving Eurozone inflation closer to ‘the central bank’s ceiling of 2%’ (Extract A, line 17). (12 points)
(e) Discuss ‘looser fiscal policy’ and ‘supply-side reforms’ (Extract A, lines 20 and 21) that may be used by governments of Eurozone countries to increase economic growth. (15 points)
Question 7: Edexcel A-Level Economics 9EC0 June 2017 Paper 2
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 (25 points).
Question 8: Edexcel A-Level Economics 9EC0 November 2021 Paper 3
Extract A
What is the true human cost of your £5 hand car wash (HCW)?
The UK’s hand car washes (HCWs) are extremely price competitive, but they have also been linked to modern slavery. Are they ever fair for workers? There is little agreement about how many HCWs there are in the UK. Estimates range from 10 000 to 20 000. This lack of accurate information about the industry makes government regulation very difficult. Automated car washes, with their fierce rotating bristles, used to be the first option for drivers in a hurry. Now there is more choice.
While the economy slows and incomes fail to keep up with inflation, demand for HCWs has grown. Many people see paying £5 for a car washed by someone else, rather than cleaning it at home, as a small expense which yields a high utility. But what is the true cost of a £5 car wash – and what should we be paying?
The growth of HCWs is partly the result of changes in the structure of industry in the UK. Many petrol stations have closed as drivers fill up at supermarkets. Garages and their forecourts have closed as cars become more reliable and locked into service agreements. The available sites for HCWs have therefore increased significantly and rents have fallen. HCW entrepreneurs have identified available land and have benefitted from changes in the labour market, partly as a result of EU migration. UK drivers are now able to obtain cheap and effective hand car washing. For many migrants, car washes are a first job.
“They accept car washing for a short period while they improve their language skills and move into other industries,” says Ian Clark, a professor of work and employment at Nottingham Business School. “But there are also car-wash workers without networks who are in a dead end, working there for long periods.”
Many drivers are only interested in getting the cheapest wash. If the price is very low, it probably means that workers are receiving less than the minimum wage and working in poor conditions. Crude calculations illustrate the problem. A £5 HCW employing five workers for 10 hours a day would need to wash 79 cars a day to just cover the wage costs. This assumes the workers are paid the minimum wage. This is one car every seven and a half minutes. Even if the profit can be higher on valet services, the price of which can be as little as £12 for a full inside-and-out clean, it’s hard to see how a car wash price as low as £5 pays a living wage. This ignores all other costs which HCWs incur such as business rates and rent.
Evidence from car-wash workers is limited but Clark and others have been able to build a picture of some of the tougher conditions on drenched forecourts. “Like nail bars and small garment manufacturers, car washes are what we call ‘hard-to-reach places,’” Clark explains. As part of the research, Clark and his team spoke to workers from 45 HCWs in the Midlands.
Clark and his team met and observed workers who lacked waterproof boots or trousers, or hi-vis jackets and gloves. “They’re spraying around hydrochloric acid solution for alloy wheels, breathing in the vapour and fumes,” Clark says. Some workers were paid a little over half the minimum wage.
Extract B
Government intervention in the HCW industry
There are three main areas of government intervention that might impact on labour intensive firms such as HCWs:
First, there is the planning issue which focuses on the impact on the environment, for example, the disposal and recycling of waste water and chemicals. There could be planning regulations to prevent the use of tarmac rather than concrete on forecourts. Tarmac allows waste water and chemicals to seep into the sub soil. It could also be a requirement to have a sludge trap to stop the waste entering waterways.
Second, there is the health and safety issue for workers. Prolonged exposure to chemicals and lack of protective clothing puts the health of workers at risk. Performance targets could involve minimum levels of protective clothing and rest breaks for the workers. Third, there is the issue of tax. The informal nature of the business type makes tax evasion easier.
Not all UK HCWs violate regulations. There are legitimate, regulated HCW firms as well as examples of good practice by independent outlets. One national supermarket, Tesco, has banned all independent hand car washes from its car parks. It is now in a partnership agreement with national car wash operator Waves. It uses a WashMark certificate of quality and compliance which was introduced by the industry to improve working conditions. Other major supermarkets are considering similar changes. One adviser believes £9 is a reasonable minimum price for a basic wash. Some pressure groups have developed a mobile phone app where evidence of unreasonable conditions can be reported by drivers.
Involving drivers in the issue, and making them demand fairer car washes, creates an incentive for good businesses to improve practices and come forward to get a WashMark Certificate.
(a) Using the information provided, explain the market structure that best describes the hand car wash (HCW) industry in the UK. (5 points)
(b) Examine two reasons why the demand for HCWs increases during a period when consumer ‘incomes fail to keep up with inflation’ (Extract A line 8). (8 points)
(c) Discuss the likely effects of changes in the level of migration on firms such as HCWs in the UK. Use a labour market diagram and the information provided to support your answer. (12 points)
EITHER
(d) Evaluate the microeconomic and macroeconomic factors which determine the number of firms in an industry. Refer to HCWs or another industry of your choice. (25 points)
OR
(e) Evaluate the microeconomic and macroeconomic effects of increased government intervention in an industry. Refer to HCWs or another industry of your choice (25 points).
Question 9: Edexcel A-Level Economics 9EC0 November 2020 Paper 3
Extract A
Can Turkey’s central bank avoid another rate rise?
At an annual rate of 25%, Turkey’s inflation is alarming. However, it may have peaked. This may be a turning point for the economically struggling country, whose currency (the Turkish lira) has lost nearly a third of its value against the US dollar in 2018. The central bank may be able to avoid tightening monetary policy further, as a severe economic adjustment is already well under way. Turkey is highly indebted in foreign currency. The Turkish government takes measures against excessive appreciation or depreciation of the Turkish lira to reduce financial stability risks. The financial market faces difficulties in trying to restore foreign investors’ confidence.
Consumer prices increased by 2.7% in October 2018, a much lower rate than the 6.3% recorded in September 2018. The lira has stabilised, having risen 16% since the central bank raised interest rates by 6.25 percentage points. However, the government wants lower borrowing costs to fuel credit growth and economic expansion. Timothy Ash at a London investment bank says at this point it’s “illogical” to raise interest rates again in Turkey. That’s because Turkey’s economy is already experiencing a severe slowdown.
In the long term Turkey’s economic growth is expected to be above that of other emerging markets such as Brazil, Russia and China. Turkey’s private sector is resilient. Between 2018–50 we expect Turkey to grow by an annual average of 3.1%. Brazil is expected to grow by an annual average of 2.1%, Russia by 1.6% and China by 2.8%. GDP growth will nevertheless be well below that recorded in 2004–07 and 2010–15. Average growth in GDP per head will be substantially lower, mainly reflecting the expected rise in the total population.
Extract B
Turkey aims to bin the plastic bag
You get a free plastic bag whenever you go to a shop, even if it is just to buy a loaf of bread or a chocolate bar. In Turkey, plastic bags are everywhere, with millions being thrown away, and their use is causing a growing environmental problem.
In Istanbul, the country’s biggest city with about 12 million people, around 10 000 tonnes of waste are being collected every day. Plastic bags and other plastic waste make up 950 tonnes, or almost 10%, of the total waste.
The Turkish government said it was looking at ways to discourage the consumption of single‑use plastic bags. One possible step currently under review is a ban of the black bags that are said to contain carcinogens. Another is that the state may raise taxes on plastic products, which could lead to supermarkets charging consumers for the bags. In Corlu, a town north‑west of Istanbul, a local environmental group distributed 20 000 canvas bags to shoppers in one month. In some parts of Turkey, plastic bags are completely banned, with heavy fines for both firms and consumers who use them.
Extract C
Istanbul’s third airport set to be the busiest in the world
Istanbul’s third airport is being constructed over an area of 76.5 million square metres, to the north of Istanbul. When complete, the new airport will have six runways and have an annual passenger capacity of up to 200 million people, making it potentially the world’s busiest airport. “This airport is going to be the most important hub between Asia and Europe,” said one business leader.
The airport design includes high vaulted ceilings and spacious, modern and efficient design – and its tulip‑shaped air traffic control tower won the 2016 International Architecture Award. It uses mobile applications and artificial intelligence for customers, is energy efficient and has a high‑tech security system. The site employs 36 000 people and is estimated to cost the equivalent of £10 billion. However, the rush to meet the deadline set by the Turkish government is a major cause of accidents on the construction site, according to the construction workers’ union.
(a) Explain how the Turkish central bank intervenes in the currency market to prevent ‘excessive appreciation or depreciation of the Turkish lira’ (Extract A, lines 7–8). (5 points)
(b) Examine two reasons why the Turkish government may want to avoid a significant fall in the exchange rate of the Turkish lira. (8 points)
(c) Discuss the likely success of policies to reduce the consumption of single‑use plastic bags in cities such as Istanbul. (12 points)
EITHER
(d) Evaluate the likely microeconomic and macroeconomic effects of a rise in interest rates in Turkey. (25 points)
OR
(e) Evaluate the microeconomic and macroeconomic impact of large infrastructure projects such as the building of a third airport in Istanbul. (25 points)
Question 10: Edexcel A-Level Economics 9EC0 June 2019 Paper 3
Extract D
Rising debt levels in Africa
Increases in national debt have brought several African governments towards a debt-servicing crisis when the repayment of debt and interest become unsustainable. Between 2010 and 2015, many sub-Saharan countries raised debt totalling more than £20 billion. Back then, with commodity prices soaring and foreign loans available at very low interest rates, everyone agreed that borrowing was the way to grow an economy with expansionary fiscal policy. Since 2015, some African governments – beneficiaries of big debt write-offs at the start of the century – have taken to private debt markets too eagerly, leaving them with heavy repayment schedules at a time of lower commodity prices.
Until recently, the International Monetary Fund (IMF) has played down African debt concerns, pointing to better management of public resources and greater transparency. But it was shaken by Mozambique’s default on more than £2 billion of secret loans used to purchase a non-existent tuna-fishing fleet, raising fears of hidden debt in other African countries with similar levels of corruption. The median level of debt in sub-Saharan Africa had risen sharply from 34% of gross domestic product in 2013 to 48% in 2017. Although that is low by international standards, analysts said debt burdens were heavier than they appeared because of most African countries’ low tax base. “The real thing to look for is debt to revenue, or debt-service as a percentage of government spending,” said John Ashbourne, Africa Economist at Capital Economics. In several countries, he said, debt payments were above 20% of government revenue, with an opportunity cost in terms of government spending.
Extract E
Mozambique’s economic stability is being put to the test
The economy of Mozambique, which gained independence from Portugal in 1975, has continued to under-perform. Large-scale emigration, especially of skilled workers, economic dependence on South Africa, a severe drought, a prolonged civil war and political tensions have hindered the country’s development. More than half of Mozambique’s 26 million people continue to live below the poverty line.
GDP growth declined to 3.6% in 2016 due to fiscal tightening and a slowdown in foreign direct investment. A weak manufacturing sector employs just 3.2% of the population, and is made up of small enterprises (90%), many of which were set up with the aid of microfinance. Traditional export earnings dropped due to depressed global demand.
In addition a wide-scale drought seriously affected agricultural production. Foreign currency inflows have weakened – as large-scale gas projects were put on hold, and 14 external lenders suspended direct budget support, as a lesson to be learned from the tuna-fleet scandal. The state budget deficit was 10.7% of GDP in 2017. High interest rates have reduced aggregate demand, and import costs added to inflation following further depreciation of Mozambique’s currency, the metical, to a new low of 100 meticals to £1. Mozambique needs urgently to improve its investment environment and confidence in its institutions. The World Economic Forum’s global competitiveness ranking placed Mozambique 136 out of 137 countries.
Longer term, Mozambique’s economic prospects are promising. There has been progress in talks on restoring international confidence in the government’s running of the economy, leading to a lasting and sustainable agreement between rival political groups. The development of gas fields off Mozambique’s coast discovered in 2011 is set to transform the economy, coming into production in the 2020s. A rise in coal and electricity exports should help growth to increase. But in the short term, it remains uncertain whether Mozambique can deliver badly needed economic stability.
Extract F
Microfinance in Mozambique
Microfinance in Mozambique started in the late 1980s through projects initiated by international relief organisations. The sector has expanded to include many private banks and non-government organisations (NGOs), see Figure 3. This has resulted in wider use (over 100 000 borrowers) and many new business start-ups which could not have gained finance from any other source. Evidence suggests that there is unfulfilled demand for microfinance and a large potential for expansion.
(a) With reference to Extract D line 21, explain why ‘opportunity cost’ is a problem for governments of developing countries when servicing debt. (5 points)
(b) Examine two reasons, apart from access to finance, why 90% of the manufacturing sector in Mozambique ‘is made up of small enterprises’ (Extract E, line 9). (8 points)
(c) Discuss whether borrowers benefit from microfinance. Make reference to Mozambique in your answer. (12 points)
EITHER
(d) Evaluate the microeconomic and macroeconomic factors, apart from access to credit and banking, influencing growth and development in Mozambique. (25 points)
OR
(e) Evaluate the likely microeconomic and macroeconomic effects of relatively high inflation rates in many African countries. (25 points)
Mark is an A-Level Economics tutor who has been teaching for 6 years. He holds a masters degree with distinction from the London School of Economics and an undergraduate degree from the University of Edinburgh.