Reference no: EM133076255
Anne-Marie recently started work as an analyst in the bond department of a major investment dealer. One of her first tasks was to assess Canadian market conditions for possible new fixed-income investments.
Below are a few of her preliminary findings.
-Fourth-quarter GDP confirms the economy is moving through expansion and approaching a peak.
-Consumer income continues to trend upward.
-Consumer demand for durable goods is up 2.3% on a year-over-year basis.
-Factory hours worked per week are on the rise.
-The Labour Force Survey reports full-time wages are above the five-year trend.The Consumer Price Index (CPI) last year was 128.7. This year the CPI is 132.8.
In her report, Anne-Marie states that strong consumer demand continues to place upward pressure on prices.
1. If the economy is indeed experiencing a period of inflation, list and discuss three costs associated with rising prices?
2. What is the impact on inflation if unemployment continues to below?
-Inflation will tend to begin to trend lower.
-Inflation will tend to be high
-Lower inflation will result in higher economic growth.
-Lower unemployment can be maintained in the short run by increasing inflation at a lower rate.
3. What type of inflation is Canada experiencing, based on Anne-Marie's report?
-Cost-push inflation.
-Deflation.
-Demand-pull
-Disinflation
4. Calculate the inflation rate using the CPI statistics from last year (128.7) and this year (132.8) that Anne-Marie provided in his report.
-2.05%
-3.09%
-3.19%
-4.10%