Cambridge International as and a level Economics Ebook

1
Explain in what sense infl ation may reduce the value 
of people’s savings.
2
Why might most of the items in a country’s 
consumer price index fall but the consumer price 
index still increase?
3
Explain why the change in Brazil’s foreign exchange 
rate may have caused cost-push infl ation.
4
Using 
Table 4.2
, explain what happened to prices in 
Brazil between:
a
2008 and 2009
b
2010 and 2011
5
Compare the infl ation rates experienced in Mexico 
and Venezuela over the period shown.
% change in consumer price index
Year
Brazil
Mexico
Venezuela 
2007
3.5
3.9
18.7
2008
4.7
3.9
28.2
2009
4.7
5.5
30.2
2010
5.3
3.9
32.0
2011
5.0
3.9
32.0
2012
5.3
3.7
25.2
2013
6.3
3.7
36.0
Table 4.2 
Inflation rates in Brazil, Mexico and 
Venezuela 2007–2013
91

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Cambridge International AS Level Economics
Th
e current account balance is the overall balance 
of the trade in goods, trade in services, income and 
current transfers. A current account defi cit means that 
the combined debit items on the four parts exceed the 
combined credit items on the four parts.
Current account: 
within the balance of payments, a record 
of the trade in goods, trade in services, investment income 
and current transfers.
KEY TERM
Capital account
For most countries, the 
capital account
is a relatively 
small part of the balance of payments. It includes, 
for instance, government debt forgiveness, money 
brought into and taken out of the country by migrants, 
the sales and purchases of copyrights, patents and 
trademarks.