Question

Imagine two countries, X and Y, with consumer price indexes in 2015 equal to 160 (in country X) and to 120 (in country Y). The base year is 2000 (a) (3 points) Which of the countries has experienced a higher inflation rate between the years 2000 and 2015? b) (7 points) Suppose the Consumer Price Index of country Y in 2016 (with base year 2000) is equal to 130 and the Consumer Price Index in 2016 of country X is 170. What can we say about the rate of inflation (between the base year and 2016) and the price level in 2016 in the two countries? Which country has experienced a higher inflation rate and which country has a higher price level? Explain carefully your answer and, if you think that these questions cannot be answered without further information, explain what kind of information you would need in order to be able to answer these questions

Answer 1

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