Which of these is not an evaluation point on CPI?

Does not reflect price changes that may affect consumers

Price of pens increases by 10%, and pens account for 15% of CPI. What is the effect on the IR?

The inflation rate would increase by 1.5%

What is the consequence of inflation on borrowers?

Real IR lowers. $$ paid back is worth less than $$ borrowed

What causes demand pull inflation?

A change in the determinants of AD

Formula for a weighted price index

(Pa*weight in hundreds)+(Pb*weight in hundreds)

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12-2ECH Inflation

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Questions 10

Answers

1
Which of these is not an evaluation point on CPI?
Does not reflect changes in quality of products
Does not reflect purchases of all households
May not measure changes in price of important product eg oil
Does not reflect price changes that may affect consumers
2
Which of these groups are helped by inflation?
Lenders
Exporters
Savers
Importers
3
What are the two types of deflation?
Cost push & supply side
Demand pull & supply side
Cost pull & demand deficient
Demand deficient & supply side
4
Price of pens increases by 10%, and pens account for 15% of CPI. What is the effect on the IR?
The inflation rate would increase by 1.5%
The inflation rate would increase by 0.15%
The inflation rate would increase by 150%
The inflation rate would increase by 15%
5
What is cost push inflation?
Change in both
Change in AS
Change in cost of car
Change in AD
6
What is the consequence of inflation on borrowers?
Real interest rate lowers, so $ saved is eroded by inflation
Real IR lowers. $$ paid back is worth less than $$ borrowed
Real IR increases: $ paid back is worth more than $ borrowed
Real IR lowers, so $ paid back is worth less than $ lent
7
Which one of these is not a consequence of inflation?
Loss of purchasing power
Income inequality
Lower real interest rate
Reduction in international competitiveness
8
What causes demand pull inflation?
A change in the determinants of water
A change in the cost of production
A change in the determinants of AS
A change in the determinants of AD
9
Which one of the following are not a cause for supply-side deflation?
Lower oil prices
Better infrastructure
Lower minimum wage
Higher government expenditure
10
Formula for a weighted price index
(CPI2-CPI1)/CPI1*100
(Pa*weight in hundreds)+(Pb*weight in hundreds)
(New year-previous year)previous year*100
%∆PC(weight*0.01)

12-2ECH Inflation Flashcards | StudBud