Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 22, Problem 5PA
Subpart (a):
To determine
Relative price and inflation.
Subpart (b):
To determine
Relative price and inflation.
Subpart (c):
To determine
Relative price and inflation.
Subpart (d):
To determine
Relative price and inflation.
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Consider the effects of inflation in an economy composed of only two people: Larry, a bean farmer, and Megan, a rice farmer. Larry and Megan both always consume equal amounts of rice and beans. In 2016 the price of beans was $1, and the price of rice was $4.
Suppose that in 2017 the price of beans was $2 and the price of rice was $8.
Inflation was
.
Indicate whether Larry and Megan were better off, worse off, or unaffected by the changes in prices.
Better Off
Worse Off
Unaffected
Larry
Megan
Now suppose that in 2017 the price of beans was $2 and the price of rice was $4.80.
In this case, inflation was
.
Indicate whether Larry and Megan were better off, worse off, or unaffected by the changes in prices.
Better Off
Worse Off
Unaffected
Larry
Megan
Now suppose that in 2017, the price of beans was $2 and the price of rice was $1.60.
In this case,…
On the way into school you hear the following report on the radio: "inflation for the month of February was 0.4%. Over
the year inflation was 2.2%." Which of the following options best explains what these figures mean?
Select one:
a. Inflation in February was much slower than it was in other months from the past year.
b. The prices of household necessities, excluded household luxuries, increased by 2.2%, compared to 12 months
ago.
c. The prices of the things a typical urban consumer buys, as estimated by the Bureau of Labor Statistics, increased
on average 2.2%, compared to 12 months ago.
d. The government increased prices by 2.2% over the past year in order to keep pace with production costs.
how important is the inflation for the common people in the community? explain.
Chapter 22 Solutions
Essentials of Economics (MindTap Course List)
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