According to a mid-January data release from Statistics Mauritius (the central statistics agency), the consumer price index (CPI) rose by 6.8% year on year in December 2021, taking annual average inflation to 4% in 2021, its highest level since February 2018. The main drivers of inflation in 2021 were food and non-alcoholic drink prices (which increased by 10% year on year), alcoholic beverages and tobacco products (which rose by 9.7%), and transport (up by 7.2%). The prices of furnishings, household equipment and routine household maintenance also grew sharply, by 11% (see Figure below). Higher inflation is attributable to the global increase in food and fuel prices, and the cost of freight due to the coronavirus pandemic. As a small island state, Mauritius has a high dependence on food and fuel imports, and both commodities have a heavy weighting on the CPI. The inflationary effect of costlier imports was exacerbated by a weakening Mauritian rupee, which depreciated from MR40.30:US$1 in December 2020 to MR43.91:US$1 in December 2021. Page 2 of 3 Business Economics - MGT6008 Food and transport prices drive up inflation in Mauritius (% change, year on year) -Consumer prices Food and non-alcoholic beverages -Transport Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2021 Source: Bank of Mauritius 12 9 6 3 0 -3 a) Define inflation and discuss its causes and consequences. b) [10 marks] Using examples to illustrate your arguments, discuss the various tools available to the Mauritian government to control inflation.
According to a mid-January data release from Statistics Mauritius (the central statistics agency), the consumer price index (CPI) rose by 6.8% year on year in December 2021, taking annual average inflation to 4% in 2021, its highest level since February 2018. The main drivers of inflation in 2021 were food and non-alcoholic drink prices (which increased by 10% year on year), alcoholic beverages and tobacco products (which rose by 9.7%), and transport (up by 7.2%). The prices of furnishings, household equipment and routine household maintenance also grew sharply, by 11% (see Figure below). Higher inflation is attributable to the global increase in food and fuel prices, and the cost of freight due to the coronavirus pandemic. As a small island state, Mauritius has a high dependence on food and fuel imports, and both commodities have a heavy weighting on the CPI. The inflationary effect of costlier imports was exacerbated by a weakening Mauritian rupee, which depreciated from MR40.30:US$1 in December 2020 to MR43.91:US$1 in December 2021. Page 2 of 3 Business Economics - MGT6008 Food and transport prices drive up inflation in Mauritius (% change, year on year) -Consumer prices Food and non-alcoholic beverages -Transport Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2021 Source: Bank of Mauritius 12 9 6 3 0 -3 a) Define inflation and discuss its causes and consequences. b) [10 marks] Using examples to illustrate your arguments, discuss the various tools available to the Mauritian government to control inflation.
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter7: Taking The Nation's Economic Pulse
Section: Chapter Questions
Problem 8CQ
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