The tables above give the purchases of an average consumer in a small economy. (These consumers purchase only shampoo and pizza.) Suppose 2015 is the reference base period
a) What is the cost of the CPI basket in 2015 and 2016?
b) What is the CPI in 2015 and in 2016?
c) What is the inflation rate between 2015 and 2016?
a) For 2015 the CPI basket costs $171.25. For 2016 the CPI basket costs $178.75.
b) For 2015, the base period, the CPI is 100.0. For 2016 the CPI is ($178.75/$171.25 ) × 100, which is 104.4.
c) Between the two years the inflation rate is equal to [(104.4 - 100.0 )/100] × 100, which is 4.4 percent.
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Corn is used to produce tortillas. If the price of corn increases
A) the demand for tortillas decreases. B) the supply of tortillas increases. C) the supply of tortillas decreases. D) the demand for tortillas increases.
In an open economy with global capital markets and mobile capital:
A) a country has control over both its domestic money supply and exchange rate. B) a country has control of either its domestic money supply or exchange, but not both. C) a country only has control over its domestic money supply. D) a country only has control over its exchange rate.