(a)
- Why are weights included when constructing a CPI? [2]
- Explain possible reasons for the changes in the weights for alcohol and tobacco and transport between 1992 and 2008. [4]
(b)
- What does inflation mean? [2]
- Using Fig. 1, compare Paraguay’s inflation from 1950 to 2005 with Venezuela’s. [2]
- To what extent was Paraguay able to achieve a low and stable inflation rate between 1950 and 2005? [4]
(c)[6]
Discuss whether all countries ought to set annual inflation targets of around 3%.