Question

TAP Table 6-4 This table shows the CPI for various categories of goods and services Year 1 Year 2 168.4 1736 169.6 153.3 1139.6 176,2 1154,3 141.4 Food and Beverages Housing Transportation Gasoline Refer to Table 6-4. Among these categories, what was the highest rate of inflation? O a. 52 percent b. 66 percent O c.3.1 percent 39 percent

Answer 1

1 - Option D

3.9 percent

This Inflation rate has found to be highest amoung all the given goods. It is present in housing.

In all the other goods , inflation rate is less than 3.9 %

2 - Option A

Reserves will increase by $ 100 million and money supply will increase by more than $ 100 million

This is because this increase part of money will go into the reserve system of bank. As the system follows the fractional reserve system , there will be the effect of money multiplier and hence the total money supply will rise by more than $ 100 million