Amira has borrowed £8,000 from a bank. The amount she must repay is fixed in pounds. Over the next year, inflation is 5%. What happens to the real value of her debt over the year?
It rises, because prices in the economy have gone up by 5%
It stays the same, because she still owes exactly £8,000
It falls only if her pay rises by more than the 5% inflation rate
It falls, because the fixed sum she repays will buy fewer goods and services
62 exam-style questions on OCR GCSE Economics 3.4 Price stability, covering 3.4.1 Price stability and inflation, 3.4.2 Measuring inflation with CPI, 3.4.3 Calculate the effect of inflation, 3.4.4 Analyse inflation figures, and 3.4.5 Causes and consequences of inflation. Each one has a worked solution and a mark scheme showing where the marks go.