Inflation and its Control

    OCR
    GCSE

    Examination of the sustained increase in the general price level, focusing on the construction and limitations of indices (CPI, RPI). Analysis of inflationary causes via AD/AS frameworks (demand-pull, cost-push) and the Quantity Theory of Money. Evaluation of the consequences for economic agents, including distributional effects and international competitiveness. Assessment of the efficacy of the Monetary Policy Committee (MPC) in utilizing interest rates and quantitative easing to maintain the 2% symmetric target.

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    Objectives
    4
    Exam Tips
    3
    Pitfalls
    4
    Key Terms
    4
    Mark Points

    What You Need to Demonstrate

    Key skills and knowledge for this topic

    • Award marks for precise definitions of inflation (sustained rise in general price level) versus disinflation and deflation
    • Credit logical chains of reasoning (AO3) that link interest rate changes to transmission mechanisms (e.g., higher rates -> higher cost of borrowing -> reduced consumption)
    • Responses must apply concepts to the specific context provided in the case study (AO2), quoting data or referencing specific industries
    • Evaluation (AO3) must go beyond listing pros/cons to provide a supported judgment on the most significant factor or the likelihood of policy success

    Marking Points

    Key points examiners look for in your answers

    • Award marks for precise definitions of inflation (sustained rise in general price level) versus disinflation and deflation
    • Credit logical chains of reasoning (AO3) that link interest rate changes to transmission mechanisms (e.g., higher rates -> higher cost of borrowing -> reduced consumption)
    • Responses must apply concepts to the specific context provided in the case study (AO2), quoting data or referencing specific industries
    • Evaluation (AO3) must go beyond listing pros/cons to provide a supported judgment on the most significant factor or the likelihood of policy success

    Examiner Tips

    Expert advice for maximising your marks

    • 💡When analyzing data, explicitly quote figures from the chart/table to secure AO2 application marks; do not just say 'inflation rose'
    • 💡For 'Evaluate' questions, structure the response with one paragraph supporting the policy, one opposing/suggesting an alternative, and a final justified conclusion
    • 💡Use the 'BLT' structure for analysis paragraphs: Because (the cause), Leads to (the mechanism), Therefore (the impact on the economy)
    • 💡Memorize the Bank of England's inflation target (2% ±1%) to use as a benchmark for evaluating the severity of inflation data

    Common Mistakes

    Pitfalls to avoid in your exam answers

    • Confusing a fall in the rate of inflation (disinflation) with a fall in prices (deflation); assuming prices decrease when inflation drops from 5% to 2%
    • Conflating fiscal policy (taxes/spending) with monetary policy (interest rates) when discussing control measures
    • Asserting that inflation is 'bad' without specifying for whom (e.g., failing to recognize that borrowers with fixed debt might benefit)

    Study Guide Available

    Comprehensive revision notes & examples

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    Key Terminology

    Essential terms to know

    Likely Command Words

    How questions on this topic are typically asked

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