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Economics - Test Section 5

The document is an Eco Test Section 3 focused on inflation in Bangladesh, detailing the annual inflation rate from 2009 to 2019, which averaged 6.7%. It discusses the causes of inflation in both food and non-food sectors, the government's target inflation rate of 5.5%, and the central bank's role in maintaining price stability through monetary policy. The test includes multiple-choice questions and data response sections evaluating students' understanding of economic concepts and their ability to analyze the impact of inflation.

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Maria andrea quattrochi
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15 views5 pages

Economics - Test Section 5

The document is an Eco Test Section 3 focused on inflation in Bangladesh, detailing the annual inflation rate from 2009 to 2019, which averaged 6.7%. It discusses the causes of inflation in both food and non-food sectors, the government's target inflation rate of 5.5%, and the central bank's role in maintaining price stability through monetary policy. The test includes multiple-choice questions and data response sections evaluating students' understanding of economic concepts and their ability to analyze the impact of inflation.

Uploaded by

Maria andrea quattrochi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Eco - Test Section 3

CALIFICACIÓN

Name:______________________ Date: __________

AS level - Multiple choice, Data Response

❖ Answer two questions in total:


➢ Section A: answer all parts of Question 1.

Evaluation Criteria

Criteria A: know and understand the terminology, concepts, theories and principles of
economics

Criteria B: read critically to gain information about the changes in the wider business
and social environment

Criteria C: express ideas in writing

INFORMATION

● The total mark for this paper is 20.

● The number of marks for each question or part question is shown in brackets [ ].

Page 1 of 5
Eco - Test Section 3

Section A

Answer all parts of Question 1

Inflation in Bangladesh The annual inflation rate in Bangladesh, as measured by changes


in the Consumer Prices Index (CPI), has varied in the period from 2009 to 2019 between
5.4% and 11.4%. The average annual rate of inflation over this period has been 6.7%, one
of the highest in Asia.

The relatively high rate of inflation has been caused by price rises in both the food and
the nonfood sectors. In terms of the food sector, there have been significant rises in the
price of fish, chicken and vegetables, particularly onions. In terms of the non-food sector,
price rises have been significant in healthcare, transport and energy resources such as
gas. The Bangladesh Government is concerned about the possible consequences of a
relatively high rate of inflation. It has now therefore set an annual inflation rate target of

Page 2 of 5
Eco - Test Section 3

5.5%. The central bank of Bangladesh has the maintenance of price stability as one of its
main objectives. It uses monetary policy to control the rate of increase of prices in the
country. However, there is always the possibility that tough monetary policies could do
more harm than good to an economy, compared with the possible use of fiscal policy. The
central bank recognises that inflation can be caused by both demand-pull and cost-push
factors in the economy. A particular cause of inflation is the increase in wages. The Wage
Rate Index (WRI) rose in December 2019 by 6.6% compared with a 6.4% rise in the index
in November.

Source: Adapted from ‘Inflation hits 9-month high’, The Daily Star, Bangladesh, 16 October 2019, accessed
on 24 February 2020

(a) Describe the trend in the annual inflation rate of Bangladesh between 2009 and 2019.
[2]

(b) Explain why price changes in the food and the non-food sectors in Bangladesh are
treated differently when calculating the CPI. [2]

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Eco - Test Section 3

(c) Explain one domestic consequence and one external consequence for Bangladesh of
having ‘a relatively high rate of inflation’. [4]

(d) Analyse, with the help of aggregate demand and aggregate supply diagrams, how
increasing wages can cause both demand-pull and cost-push inflation in Bangladesh. [6]

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Eco - Test Section 3

(e) ‘However, there is always the possibility that tough monetary policies could do more
harm than good to an economy, compared with the possible use of fiscal policy.’ Discuss
whether monetary policy or fiscal policy is more likely to be effective in controlling
inflation. [6]

Page 5 of 5

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