Question 3.

Will the following lead to cost-push or demand-pull inflation, or both?

- The Reserve Bank increase interest rates and the economy slows down

- As a result of falling unemployment, trade unions become more aggressive and

demand higher wages.

- The government reduces the rate of GST.

- The government cuts income tax rates and raises government expenditure at a

time of near full employment.

- Increasing industrial concentration leads to more oligopolistic collusion to raise

prices.

a) Briefly explain consumer price index? If the CPI is 96 in 2020 and 98 in 2022, calculate the rate of inflation from 2020 to 2022.