Question

Part III: Inflation Year Annual Inflation Rate (% change in CPI) Annual Growth in Output   (%...

Part III: Inflation

Year

Annual Inflation Rate

(% change in CPI)

Annual Growth in Output   (% change in Real GDP)

2020

-1.0%

+3.0%

2021

+1.0%

+4.0%

2022

+3.0%

+2.5%

2023

+8.0%

-0.5%

2024

+6.0%

+3.0%

Use the above (imaginary) future data to answer the questions that follow.

In what years, if any, will the economy experience inflation?

In what years, if any, will the inflation rate be significantly high enough to worry about?

In what years, if any, will the economy experience disinflation?

In what years, if any, will the economy experience deflation?

In what years, if any, will the economy experience hyperinflation?

In what years, if any, will the economy experience stagflation?

In this table of imaginary data the greatest annual inflation rate is 8%. In the actual data reported for the U.S. economy, when was the last time we had inflation even higher than that (a specific year is not required, just a general time frame)?

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Homework Answers

Answer #1

1. 2022,2023, 2024 as annual inflation rate is greater than annual growth in output
2. 2023 as it is being maximum
3. 2024, as there is a decrease in inflation trend
4. 2020, below zero percent
5. 2023, as it is very high unusual rates eroding the real value of money as the growth rate of output is -0.5%
6. 2022, as the inflation is high and economic growth or output rate is reducing which would lead to increased unemployment.
7. In the history of US it was during 1920 the inflation was 24%, 1945 it was 20% and during 1980, it was 15%,

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