Inflation hmw

7.

1) False

because if lower interest rates, you're increasing investment, which increases AD and through an increase in C and I whih causes inflation

*loans

3) true. if expect inflation, negotiate for higher wages which increases the cost of production

2) True because inflation decreases the value of loand

4) False. If from keynsian perspective, shift in AD does not result in a change in price level

5) True. CPU us better bc more widely accepted

6) True. inflation causes a decreases in the value for money

7) true bc low prices appeal to foreigners

8. True bc its a leftward shift of AS which causes the Philips curve to shift right

9) false bc money allusion only occurs in the longrun

10) govt. credibility is a key influence on inflation rates

10.

a.

Year	Price of book	Price of an mp3 downlaod	Price of a burger
2009	6.50	0.99	2.50
2010	6.60	1.05	2.55
2011	6.40	1	2.40

year	P1q1+p2q2+p3q3	Cost of basket
2009	6.5x5+0.99x12+2.50x20	94.38
2010	6.6x5+1.05x12+2.55x20	96.6
2011	6.4x5+1.00x12+2.40x20	92

year	formula	Price index
2009	94.38/94.38	100
2010	96.6/94.38	102.35
2011	92/94.38	97.47

Year	Inflation rate
2010	-
2011	(102.35-100)/100x100{2.35%
2012	(97.47-102.35)/100x100{-4.88