econ→unemployment question

2010-12-26 1:39 am

1. Mr Cheung's nominal income increases by 5% in 2008 compared with that in the previous year,and the price index increases from 96 last year to 102 this year.

a) Find the rate of change of the price level in 2007-2008.

b) How does the real income of Mr.Cheung change?Explain.

2.The table below showa the CPI of an economy:

Jan-07Apr-07Jul-07Oct-07Jan-08CPI120122.5124.3127.8129.6a) Find the percentage change in the CPI between Jan 07 and Jan 08.Show your workings.

b) Name the economic phenomenon occured in this period.State its definition.

c) How did the purchasing power of money and the cost of living change?Explain.

回答 (1)

Acct

2010-12-26 5:25 am

✔ 最佳答案

Q1 (a)
(102 - 96) / 96
= 6.25%(b) real income of Mr. Cheung is decreased. Although the income is increased by 5%, but the price level is also increased by 6.25%, That is, the net change is 6.25% - 5%, 1.25%. Mr. Cheung is decreased his income by 1.25%
Q2 (a)(129.6 - 120 ) /120= 8%(b) inflation.
inflation is a rise in the general level of prices of goods and services in an economy over a period of time.[1] When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy.(c) The purchasing power of money is decreased and the cost of living is increased. The price level is increased, it requires to pay more for the same quantity of goods or services. Hence the cost of living is increased.
Purchasing power of money is decreased as it requires more money to purchase same quantity of goods or services.

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