Chapter 17, Problem 24AA

a)

To determine

To find: The type of inflation happening in the cartoon.

Explanation of Solution

The cartoon shows the demand-pull inflation because the demand-pull inflation arises when the business expands. Thus, a similar situation can be seen in the cartoon that the other round has come which means the existing game has expanded and so the amount is adjusted accordingly.

b)

To determine

To find: The rate of inflation.

Explanation of Solution

  $\begin{array}{c}\text{Inflation rate = }\frac{\text{1}\text{.031-1}}{1}\times 100\\ =\frac{0.031}{1}\times 100\\ =3.1\%\end{array}$

The inflation rate is 3.1% because the amount increases from 1 million to 1.031 million.

c)

To determine

To find: The new title of the show when inflation is 5%.

Explanation of Solution

The new title will be Welcome to another exciting round of “who wants to be 1.05 millionaires”.

Here, the five percent increase of one million will be 0.05 million so the total increased amount is 1.05 million.