Homework Answers
a)
UNCERTAIN
Reason: Inflation in countries is calculated using growth rate of CPI. Absolute value of a particular year of CPI says nothing about inflation.
b)
TRUE
Reason: When consumers become more optimistic about economic conditions and increase consumption, their demand for money increases. This shifts the money demand curve to the right, leading to an increase in interest rates.
c)
TRUE
Reason: A reduction in budget deficit will increase investment and not decrease investment, as higher amount of funds are now available.
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