4 (a) Explain the main causes of changes in the general price level in your country, or any other country with which you are familiar. (b) Discuss whether monetary policy alone is the best way for a government to correct inflation.

Mark scheme

Marking points from the official mark scheme (May/June 2018). The mark or mark type is shown in brackets.

1. [Up to 6 marks] For an knowledge and understanding and application of cost-push inflation
2. [Up to 6 marks] For an knowledge and understanding and application of demand-pull inflation
3. (8 marks maximum)
4. [8] The question refers to 'causes' so we should expect candidates to make reference to at least two causes. If, however, the candidate provides application to one country and explains that there is only one cause of inflation in that country then up to 6 marks are available.
5. [Up to 4 marks] For analysis of how monetary policies might be used to correct inflation with due reference to the advantages and disadvantages of this approach.
6. [Up to 4 marks] For analysis of how at least one other policy might be used to correct inflation with due reference to the advantages and disadvantages of this approach.
7. (AN: Up to 8 marks maximum)
8. [Up to 4 marks] Up to 4 marks for an_evaluation as to whether monetary policy is the best way to correct inflation with 1 mark reserved for a reasoned conclusion.
9. (EV: Up to 4 marks maximum)
10. [12] Candidates need to explain how governments might use monetary policy to cure inflation and the difficulties associated with this. They can then compare this policy with fiscal and or supply side methods.