Tarvia is an island economy that imports most of its fuel. Economists are looking back at the events of the past two years.
Which sequence of events in Tarvia is most consistent with demand-pull inflation?
The price of imported fuel rises, firms' running costs increase, and prices rise even though orders from households have not grown
Households borrow more to spend on homes and holidays, firms hire extra staff to meet orders, and prices stay steady because firms have spare capacity
The money supply grows, but households in Tarvia save all of the extra money, so total spending on goods and services is unchanged
Households borrow more to spend on homes and holidays, firms hire extra staff to meet orders, and prices rise once firms are working at full capacity
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.