Question

In: Economics

The table below shows the consumer price index of a country from 2008 to 2017. YEAR...

The table below shows the consumer price index of a country from 2008 to 2017.

YEAR

CONSUMER PRICE INDEX

(2017 = 100)

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

88.9

93.1

96.4

100.0

103.4

107.0

109.9

95.8

98.5

100.0

(a) Calculate the rate of inflation from year 2009 to 2017.

(10)

(b) Illustrate the rate of inflation using an appropriate graph.

(5)

(c) State the year with the highest rate of inflation.

(2)

Calculate the level of output or national income equilibrium for an open economy model.

C = 500 + 0.5Yd T = 100 G = 100

I = 100 X = 100 M = 50 + 0.2Y

Expert Solution

1. (a) The table would be as below. The inflation would be calculated as .

Year	Inflation (%)
2009	4.7244
2010	3.5446
2011	3.7344
2012	3.4
2013	3.4816
2014	2.7103
2015	-12.8298
2016	2.8184
2017	1.5228

(b) The graph would be as below.

(c) As can be seen from the graph and the table, the highest rate of inflation is at the year 2009.

2. (a) The aggregate expenditure would be . We have or or . Putting the values, we have or or .

The equilibrium output would be where the AE is equal to the GDP : Y, ie. or or or or or , which is the required level of national income in equilibrium.

Rahul Sunny answered 1 year ago

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