Economics Department

Inflation

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1) What is the difference between headline and underlying inflation

2 marks

2) What is meant by a weighted index of retail prices? Explain with an example how one might be calculated.

5 marks

3) Describe the trends in inflation shown in the chart above. What can you say about the mean inflation rates in the 60s, 70s, 80s and 90s?

8 marks

4) What is the most likely explanation for the peaks in inflation in 1975-76 and 79-80.

4 marks

5) Using diagrams, explain the main methods of inflation control.

6 marks

6) Why have governments been so anxious to reduce inflation?

8 marks

7) Why might inflation have surged in the years up to 1990?

6 marks

8) Why has the UK government set a 2.5% rather than a 0% inflation target?

3 marks

9) What is deflation? Why might it be undesirable?

8 marks

10) Discuss the best policies for bringing a deflationary spiral to an end.

10 marks

60 marks