Consider the effects of inflation in an economy composed of only two people: Larry, a bean farmer, and Megan, a rice farmer. Larry and Megan both always consume equal amounts of rice and beans. In 2016 the price of beans was $1, and the price of rice was $4. Suppose that in 2017 the price of beans was $2 and the price of rice was $8. Inflation was . Indicate whether Larry and Megan were better off, worse off, or unaffected by the changes in prices. Better Off Worse Off Unaffected Larry Megan Now suppose that in 2017 the price of beans was $2 and the price of rice was $4.80. In this case, inflation was . Indicate whether Larry and Megan were better off, worse off, or unaffected by the changes in prices. Better Off Worse Off Unaffected Larry Megan Now suppose that in 2017, the price of beans was $2 and the price of rice was $1.60. In this case, inflation was . Indicate whether Larry and Megan were better off, worse off, or unaffected by the changes in prices. Better Off Worse Off Unaffected Larry Megan What matters more to Larry and Megan? The overall inflation rate The relative price of rice and beans
Consider the effects of inflation in an economy composed of only two people: Larry, a bean farmer, and Megan, a rice farmer. Larry and Megan both always consume equal amounts of rice and beans. In 2016 the price of beans was $1, and the price of rice was $4. Suppose that in 2017 the price of beans was $2 and the price of rice was $8. Inflation was . Indicate whether Larry and Megan were better off, worse off, or unaffected by the changes in prices. Better Off Worse Off Unaffected Larry Megan Now suppose that in 2017 the price of beans was $2 and the price of rice was $4.80. In this case, inflation was . Indicate whether Larry and Megan were better off, worse off, or unaffected by the changes in prices. Better Off Worse Off Unaffected Larry Megan Now suppose that in 2017, the price of beans was $2 and the price of rice was $1.60. In this case, inflation was . Indicate whether Larry and Megan were better off, worse off, or unaffected by the changes in prices. Better Off Worse Off Unaffected Larry Megan What matters more to Larry and Megan? The overall inflation rate The relative price of rice and beans
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter12: Money Growth And Intlation
Section: Chapter Questions
Problem 5PA
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Question
Consider the effects of inflation in an economy composed of only two people: Larry, a bean farmer, and Megan, a rice farmer. Larry and Megan both always consume equal amounts of rice and beans. In 2016 the price of beans was $1, and the price of rice was $4.
Suppose that in 2017 the price of beans was $2 and the price of rice was $8.
Inflation was
.
Indicate whether Larry and Megan were better off, worse off, or unaffected by the changes in prices.
|
Better Off
|
Worse Off
|
Unaffected
|
|
---|---|---|---|---|
Larry |
|
|
|
|
Megan |
|
|
|
Now suppose that in 2017 the price of beans was $2 and the price of rice was $4.80.
In this case, inflation was
.
Indicate whether Larry and Megan were better off, worse off, or unaffected by the changes in prices.
|
Better Off
|
Worse Off
|
Unaffected
|
|
---|---|---|---|---|
Larry |
|
|
|
|
Megan |
|
|
|
Now suppose that in 2017, the price of beans was $2 and the price of rice was $1.60.
In this case, inflation was
.
Indicate whether Larry and Megan were better off, worse off, or unaffected by the changes in prices.
|
Better Off
|
Worse Off
|
Unaffected
|
|
---|---|---|---|---|
Larry |
|
|
|
|
Megan |
|
|
|
What matters more to Larry and Megan?
The overall inflation rate
The relative price of rice and beans
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