Calculate the Inflation rate using the information given: Consumer spend $2000 on food, $2000 on clothing, $1000 on health and 5000 on entertainment. The price of food rises by 5%, the price of clothing falls by 10%, the price of health services rises by 30% the price of entertainment rises by 20%.In 2004, the Chinese government became concerned about the country’s inflation rate. The price level was being driven up mainly by rising raw material and energy prices. Ministries in the Chinese government were anxious to reduce inflation rate, as they were worried about its possible effects on the country exports and savings.A) Was China suffering mainly from cost-push inflation or demand pull inflation in 2004?B) Why may inflation have a harmful effect on the country’s exports and imports? C) Explain one other cost imposed by inflation on an economy.

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Calculate the Inflation rate using the information given: Consumer spend $2000 on food, $2000 on clothing, $1000 on health and 5000 on entertainment. The price of food rises by 5%, the price of clothing falls by 10%, the price of health services rises by 30% the price of entertainment rises by 20%.
In 2004, the Chinese government became concerned about the country’s inflation rate. The price level was being driven up mainly by rising raw material and energy prices. Ministries in the Chinese government were anxious to reduce inflation rate, as they were worried about its possible effects on the country exports and savings.

A) Was China suffering mainly from cost-push inflation or demand pull inflation in 2004?
B) Why may inflation have a harmful effect on the country’s exports and imports?
C) Explain one other cost imposed by inflation on an economy.

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