Suppose the economy is in long-run equilibrium and wealth increases. In the short- run, the inflation rate wil| relative to its initial level. --- -- increase decrease not change
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- The total price of purchasing a basket of goods in the United Kingdom over four years is: year 1=940, year 2=970, year 3=1000, and year 4=1070. Calculate two price indices, one using year 1 as the base year (set equal to 100) and the other using year 4 as the base year (set equal to 100). Then, calculate the inflation rate based on the first price index. If you had used the other price index, would you get a different inflation rate? If you are unsure, do the calculation and find out.Inflation rates, like most statistics, are imperfect measures. Can you identify some ways that the inflation rate for fruit does not perfectly capture the rising price of fruit?The index number representing the price level changes from 110 to 115 in one year and then from 115 to 120 the next year. Since the index number increases by five each year, is five inflation rate each year? Is the inflation rate the same each year? Explain your answer.
- If, over time, wages and salaries on average rise at least as fast as inflation, why do people worry about how inflation affects incomes?If inflation rises unexpectedly by 5%, indicate foreach of the following whether the economic actor ishelped, hurt, or unaffected:a. A union member with a COLA wage contractb. Someone with a large stash of cash in a safedeposit boxc. A bank lending money at a fixed rate of interestd. A person who is not due to receive a pay raise foranother 11 monthsprice level LRAS inflation rate (%) JA SRAS AD1 F AD2 PC AD3 quantity of output anemployment rate ) Refer to the Figure above. If the economy starts at Cand 1, then in the short run, an increase in the money supply growth rate moves the economy to OA and 1 B and 2 C and 3
- Oil prices are on track to reach $100 a barrel this month for the first time in 2023 after surging by almost 30% sinceJune, after Russian and Saudi Arabian production cuts and rising demand from China. With many industries being heavily reliant on energy and transportation, what type of inflation would this leadto in South Africa?A. Demand-pull inflationB. Cost-push inflationC. StagflationD. HyperinflationOil prices are on track to reach $100 a barrel this month for the first time in 2023 after surging by almost 30% sinceJune, after Russian and Saudi Arabian production cuts and rising demand from China.With many industries being heavily reliant on energy and transportation, what type of inflation would this leadto in South Africa?A. Demand-pull inflationB. Cost-push inflationC. StagflationD. HyperinflationWhat is one of the potential effects of the aforementioned inflation on the South African economy?A. Decreased purchasing power of money.B. Increased consumer savings.C. Reduced interest rates on loans.D. Higher demand for imports.inflation is hectice problem of our economy especially in todays life. how this problem influances the economic acrivity in the country
- At full employment, the expected inflation rate is ... A. higher than the inflation rate B. equal to the inflation rate C. lower than the inflation rate D. unknown E. unrelated to the inflation rateA generalization of the fisher effect that can be applied to other variables is the relationship between real price growth and nominal price growth if we know the inflation rate. We can express this relationship T, where g is the growth rate (real or nominal) and t is inflation rate. Use this as greal information for problems 10-12. gnomial - 10. Assume that data shows the nominal price of a new Nissan Maxima was $12,000 in 1992 and $15,000 in 2002, but you also found a reliable source that claimed real price growth for Maximas this claim about real price growth A) 16.5% B) 5% C) 10% D) 8.5% E) Not enough information to determine was closer to 8.5%. For experienced from 1992 to 2002? to be true, how much inflation was 11. Assume that the inflation rate is the level you found in 10. If the real price growth for a Mercedes- AMG was 10%, and the nominal price in 1992 was 2002? $42,000; what is the nominal price of the Mercedes in A) $50,000 B) $53,130 C) $56,750 D) $60,070 E) $77,000 12.…Assume that an increase in aggregate demand results in a positive bargaining gap which is constant at 2%. The rate of inflation in future years will: Select one: a.Fall by 2% each year b.lncrease by 2% each year c.Remain constant at 2% per year d.Remain unchanged
