Q33 · Practice questionSimple familiar4 marks
QUESTION 33 (4 marks)
Calculate annual inflation in Years 2 and 3. Explain whether Year 3 represents deflation or disinflation.
WORKED SOLUTION
4 marksPractice marking scheme
Answer
Year 2 inflation: 5%; Year 3 inflation: 3%; disinflation.
Working
Year 2: (126 − 120)/120 × 100 = 5%. Year 3: (129.78 − 126)/126 × 100 = 3%. Inflation declines by 2 percentage points, but the CPI still increases. This is disinflation, not a fall in the general price level.
Marking criteria
- Calculates both inflation rates using the previous-year CPI. [2 marks]
- Identifies disinflation. [1 mark]
- Explains that the general price level continues to rise. [1 mark]
Practice question aligned to the current QCAA syllabus; review the worked solution and marking criteria.
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