OCR GCSE Economics: Distribution of income and wealth, inflation, price stability (J205) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover sections 3.3 and 3.4 of the OCR GCSE (9-1) Economics specification (J205, Version 2.0, June 2026). All countries, firms and figures are invented. Learn the content first with the study guide and revision notes. Also see the course hub, the checklist and the free diagnostics.

Questions

1. A worker in Country C earns a gross salary of £3,200 per month. Deductions are £520 income tax, £160 pension contribution and £20 union fee.

(a) Calculate her net pay. [2] (b) State two types of income, other than wages and salaries. [2]

2. A household owns a house worth £150,000, savings of £8,000 and a car worth £5,000. It owes £90,000 on a mortgage and £4,000 on a personal loan.

(a) Calculate the household’s net wealth. [3] (b) Explain the difference between income and wealth. [3]

3. Country C has 8 million households, 1.6 million in each fifth, and total household income of £192 billion. The poorest fifth receives 5% of income and the richest fifth 48%. After taxes and benefits the shares are 7% and 41%.

(a) Calculate the income per household of the richest fifth before taxes and benefits. [2] (b) Find the ratio of the richest fifth’s income per household to the poorest fifth’s, before taxes and benefits. [1] (c) Calculate the same ratio after taxes and benefits and state what the change shows. [2]

4. Explain two causes of differences in the distribution of income in an economy. [4]

5. Evaluate the consequences of a large gap between rich and poor households for an economy. [8]

6. A worker’s monthly pay rises from £1,800 to £1,854. During those months the general price index climbs from 100 to 106.

(a) Calculate the percentage rise in nominal pay. [1] (b) Calculate real pay, in base-year prices, to the nearest pound. [2] (c) Explain how the worker’s purchasing power has changed. [2]

7. A CPI basket has four categories. Price indices this year (last year = 100) and weights are: food (weight 0.35, index 110), housing (0.30, 104), transport (0.20, 102) and other items (0.15, 98).

(a) Calculate the CPI for this year. [3] (b) Next year the CPI is 107.9. Calculate the inflation rate for next year to one decimal place. [2]

8. Country D’s inflation rates (illustrative) were 1.2%, 1.9%, 4.5%, 8.1%, 5.0% and 2.2% in Years 1 to 6.

(a) Identify the year with the highest inflation and describe the pattern of the figures. [2] (b) An item cost £20 at the start of Year 1. Calculate its price at the end of Year 3, to the nearest penny. [2] (c) Explain why prices were still rising in Year 5. [1]

9. A saver deposits £5,000 for one year at 1.5% interest. Prices rise by 4% over the year.

(a) Calculate the interest earned. [1] (b) Calculate the end-of-year balance in start-of-year purchasing power, to the nearest pound. [2] (c) Explain why a person with a fixed-rate loan might gain from this inflation. [1]

10. Explain the difference between demand-pull and cost-push inflation, giving one cause of each. [4]

11. Evaluate the consequences of a period of high inflation for consumers, producers, savers and the government. [8]

Answers

1. (a) Net pay = 3,200 − 520 − 160 − 20 [1] = £2,500 [1]. [2] (b) Any two from interest on savings, rent from property, profit or dividends, benefits or pensions, one mark each [1] [1]. [2] Examiner insight: Subtract every deduction listed. Candidates who stop after the tax figure give a number that is neither gross nor net.

2. (a) Assets = 150,000 + 8,000 + 5,000 = £163,000 [1]. Liabilities = 90,000 + 4,000 = £94,000 [1]. Net wealth = £69,000 [1]. [3] (b) Income is money received over a period of time, such as a month, so it is a flow [1]. Wealth is the value of assets owned less debts at one moment, so it is a stock [1]. For example, a salary is income, whereas a house is wealth [1]. [3] Examiner insight: A clear contrast of flow and stock, backed by an example, shows more understanding than two separate definitions.

3. (a) 48% of £192bn = £92.16bn [1]. Divide by 1.6 million = £57,600 [1]. [2] (b) Poorest fifth: 5% of £192bn = £9.6bn, so £6,000 per household. Ratio = 57,600 ÷ 6,000 = 9.6 [1]. [1] (c) After: 41 ÷ 7 = 8,400 and 49,200, so ratio = 5.9 [1]. The gap has narrowed because taxes and benefits redistribute income, though the richest fifth still has far more [1]. [2] Examiner insight: Divide by the households in one fifth, not all 8 million. State what the numbers show, not only the numbers.

4. Cause 1: differences in education and skills [1]. Higher skills raise productivity, so employers pay more and incomes rise [1]. Cause 2: ownership of assets such as property or shares [1]. These earn rent, interest or dividends on top of wages, so asset owners receive higher incomes [1]. (Other valid causes include unemployment, occupation, inheritance, discrimination or taxes and benefits.) [4] Examiner insight: Each cause needs a stated link to income. A bare list of causes earns less than two developed ones.

5. Consequence 1: poverty at the bottom, with lower living standards, health and education [1], which can reduce skills and future earnings, a waste of potential [1]. Consequence 2: government spends more on benefits and collects less tax [1], with an opportunity cost for other services [1]. Consequence 3: poorer households spend most of any extra income, so a very uneven distribution can weaken consumer spending [1]. Counterpoint: some inequality rewards skills and effort and encourages enterprise, and redistributing too much might weaken incentives [1]. Evaluation: the effect depends on the size of the gap, whether people can move up, and what policies exist [1]. A reasoned judgement on which consequence matters most, with a reason [1]. [8] Examiner insight: Reserve space for evaluation. A judgement that names the factor it depends on, and then chooses, is stronger than “it depends”.

6. (a) (1,854 − 1,800) ÷ 1,800 × 100 = 3.0% [1]. [1] (b) Real pay = 1,854 ÷ 106 × 100 [1] = £1,749 [1]. [2] (c) Pay went up 3% in money terms, yet the price index rose 6% [1]. Real pay therefore dropped about 2.8%, so she can afford fewer goods [1]. [2] Examiner insight: Compare the pay rise with the price rise before drawing a conclusion. Nominal growth alone does not show a gain.

7. (a) Weight × index: 0.35 × 110 = 38.5, 0.30 × 104 = 31.2, 0.20 × 102 = 20.4, 0.15 × 98 = 14.7 [2]. Total = 104.8 [1]. [3] (b) (107.9 − 104.8) ÷ 104.8 × 100 [1] = 3.0% [1]. [2] Examiner insight: Show each weight times index. A single unexplained total gives little to credit if the sum slips.

8. (a) Year 4 had the highest inflation at 8.1% [1]. Inflation was low, rose sharply to the peak, then fell back in Years 5 and 6 [1]. [2] (b) Price = 20 × 1.012 × 1.019 × 1.045 [1] = £21.55 [1]. [2] (c) Inflation was still positive, so the price level kept rising, only more slowly than in Year 4 [1]. [1] Examiner insight: Quote figures from the table in your description. “Inflation went up and down” is too vague.

9. (a) 5,000 × 1.5% = £75 [1]. [1] (b) Balance = £5,075 [1]. Real value = 5,075 ÷ 1.04 = £4,880 [1]. [2] (c) The loan is repaid in money that has lost value, so the real burden of the debt falls [1]. [1] Examiner insight: Convert the final balance into start-of-year prices before judging the saver. The nominal figure alone suggests a gain that does not exist.

10. Demand-pull inflation comes from total spending rising faster than the economy can supply [1]; one cause is a cut in interest rates that raises borrowing and spending [1]. Cost-push inflation comes from firms’ costs rising and being passed on in higher prices [1]; one cause is higher energy or raw material prices [1]. [4] Examiner insight: The difference is the starting point, spending or costs. Naming the cause alone, without the type of inflation it leads to, does not answer the question.

11. Consumers: purchasing power falls if pay rises slower than prices [1], hurting those on fixed incomes most [1]. Producers: costs rise and prices change often, creating uncertainty that may deter investment [1], although firms that can raise prices faster than costs may protect profit [1]. Savers: savings lose real value if the interest rate is below inflation [1]. Government: tax revenue rises but so does spending, and the real value of its debt falls [1]. Judgement: the impact depends on how high, how long and how expected inflation is, and on whether pay keeps pace [1]. A supported conclusion on which group is hurt most and why [1]. [8] Examiner insight: Cover all four named groups, with at least one reason each. Then finish with a decision, because the same inflation can help borrowers while hurting savers.

Where marks are usually lost

• Treating debts as assets, or ignoring them, in net wealth.
• Dividing a fifth’s income by all households, not the households in that fifth.
• Quoting a ratio without saying what it shows.
• Adding inflation rates across years instead of multiplying.
• Using the wrong index when finding real values.
• Describing falling inflation as falling prices.
• Weights missing or not summing to 1 in a CPI calculation.
• Listing consequences with no chain of reasoning.
• Evaluating without a judgement, or giving a judgement without a reason.

Next steps

• Revision notes
• Study guide
• OCR GCSE Economics hub and checklist
• All free 10-minute diagnostics
• Book a free trial class

Official syllabus

OCR GCSE (9-1) Economics (J205), Version 2.0, June 2026, first assessment 2019, published by OCR; sections 3.3 and 3.4.