Question

19) If the Consumer Price Index chenges from 120 in year ene to 150 in yeae twe, the rae of inflation in the intervening yenr is A) 10 percent B) 12.5 percet 9 20 percent D) 25 percent E) 30 percent HORT ANSWER. Write the word or phrase that best completes each statement or answers the question. 20 20) The Consumer Price Index tends to the true problem of inflation

its mcq and short question answer.

Answer 1

1) Solution: 25%

Explanation: The inflation rate between Year 1 and Year 2 is the percentage change in the price indices during these two years

(150 - 120) / 120 * 100 = 30/120 * 100 = 25%

　

2) Solution: overstate

Explanation: Due to substitution bias, new product bias and quality bias CPI tends overstate the inflation

　

3) Solution: rose by 5 percent

Explanation: Real National Income = Nominal national income - Inflation = 10% - 5 % = 5%

　

4) Solution: changing the government spending and/or tax to change national income

Explanation: In the fiscal policy the government adjusts its tax rates and spending levels to influence a country's economy.

　

5) Solution: Expansionary

Explanation: Expansionary fiscal policy is increased tax benefits or government spending

As per policy we have to answer first four questions