EXERCISES

CHAPTER 9 – INFLATION

EXERCISE 1

I.

1. G
2. A
3. R
4. J
5. B
6. T
7. Q
8. U
9. E
10. S
11. I
12. D
13. F
14. H
15. M
16. J
17. C
18. O
19. K
20. N

II.

1. losers
2. losers
3. losers
4. gainer
5. gainer
6. gainer
7. gainer
8. gainer
9. losers
10. losers
EXERCISE 2

1. Demand pull
2. Demand pull
3. Demand pull
4. Demand pull
5. Cost push
6. Cost push
7. Cost push
8. Cost push
9. Demand pull
10. Cost push

EXERCISE 3
I.

1. X
2. /
3. /
4. /
5. X
6. X
7. /
8. /
9. /
10. /
11. /
12. X
13. /
14. /
15. /

II

1. Yes
2. Yes
3. Yes
4. Yes
5. Yes
6. Yes
7. No
 8. No
9. Yes
10. No
11. Yes
12. No
13. Yes
14. Yes
15. No

III.

BASE YEAR – 2000 CURRENT YEAR - 2013

ITEMS PRICE INDICES PRICE INDICES

BEEF (KILO) 150.00 6.67 160.00 6.67
MILK (CAN) 110.00 9.09 120.00 9.09
RICE (KILO) 21.50 4.65 22.50 4.65
BANGOS (KILO) 125.00 4 130.00 4
COOKING OIL 30.50 6.55 32.50 6.55
TOTAL 437 6.41 465 106.41

CPI by = 100 CPI by – CPI of Base Year

CPI cy = 465 /437 x 100 CPI by – CPI of Current Year

CPI cy = 106.41

To get the inflation rate:

IR = CPI cy – CPI by / CPI by X 100

IR = 106.41 -100/ 100 x 100

IR = 6.41%

Interpretation:

The CPI = 106.41

The IR = 6.41% – It means that the price of commodites increased by 6.41%

EXERCISE 4

I.
 1. J
2. H
3. I
4. G
5. S
6. O
7. B
8. E
9. R
10. T
11. N
12. C
13. A
14. L
15. M
16. U
17. D
18. Q
19. F
20. K

II.

Base year-2000
Given year-2013
Total weighted product during the base year = 298
Total weighted product during the given year = 333

BASE YEAR – 2000 CURRENT YEAR - 2013

ITEMS PRICE INDICES PRICE INDICES

PORK (KILO) 150.00 10 165.00 10
RICE (KILO) 20.00 15 23.00 15
FISH(KILO) 100.00 15 115.00 15
SUGAR 28.00 7.14 30.00 7.14
TOTAL 298 111.74 333 111.74
CPI by = 100 CPI by – CPI of Base Year

CPI cy = 333 /298 x 100 CPI cy – CPI of Current Year

CPI cy = 111.74
To get the inflation rate:

IR = CPI cy – CPI by / CPI by X 100

IR = 111.74 -100/ 100 x 100

IR = 11.74%

Interpretation:

The CPI = 111.74

The IR = 11.74% – It means that the price of commodites increased by 11.74%

To get the current value of peso or the PPP – Purchasing Power of Peso

PPP= 1 X 100 / CPI

= 1 X 100 / 111.74

= .8949
The value of peso at the current year 2013 is only .8949 based from the base year 2000. It also
means that the value of peso depreciates by .1051.

III.

A.

1. Businessmen
2. Speculators
3. Debtors

B.

1. Fixed income earners

2. Pensioners
3. Creditors