Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 27, Problem 3.3P
To determine
Identify the effect of inflation in short run.
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Mark Lai, a student of agricultural science in the developing country Mikatra, notes that the demand
for rice increased substantially over the last ten years. He attributes this to the substantial growth in
population during this period. Although rice cultivation in Mikatra is still labor-intensive, Mark
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Inflation is a general rise in the level of prices; however, our measures of inflation collect price information on thousands of goods, and firms set these prices. Most firms set prices as “a mark-up over costs”: P = (W/A) x (1 + z). Use this equation to explain the factors that influence inflation.
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Chapter 27 Solutions
Principles of Economics (12th Edition)
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- Average inflation went up by 65.5% since the turn of the century while college tuition and fees soared by 175%. Why has the relative price of college increased so much compared to average inflation?arrow_forwardInflation is defined as a sustained increase in the price level. is this true or false?arrow_forwardExplain the negative effects of high inflationarrow_forward
- The inflation rate in India was recorded at 4. 70 percent in May of 2013. Inflation Rate in India is reported by the Ministry of Commerce and Industry. Historically, from 1969 until 2013, India Inflation Rate averaged 7. 73 Percent reaching an all time high of 34. 68 Percent in September of 1974 and a record low of -11. 31 Percent in May of 1976. In India, the wholesale price index (WPI) is the main measure of inflation. The WPI measures the price of a representative basket of wholesale goods. In India, wholesale price index is divided into three groups: Primary Articles (20. 1 percent of total weight), Fuel and Power (14. 9 percent) and Manufactured Products (65 percent). Food Articles from the Primary Articles Group account for 14. 3 percent of the total weight. The most important components of the Manufactured Products Group are Chemicals and Chemical products (12 percent of the total weight); Basic Metals, Alloys and Metal Products (10. 8 percent); Machinery and Machine Tools (8.…arrow_forwardDescribe five economic effects of a continuous, moderate inflation.arrow_forwardIf the government is concerned about high inflation, it will likely implement some sort ofarrow_forward
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