Tutorial 02 _Questions_.doc - ECON1002 Introductory...

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ECON1002 Introductory Macroeconomics T UTORIAL 2 (Week 3) R EADING G UIDE : Review Chapters 3 and 4 of BOF as preparation for this tutorial. K EY C ONCEPTS : M EASUREMENT AND MEANING OF THE CPI AND INFLATION ; S AVINGS AND WEALTH S ELF -R EVIEW OF C ONCEPTUAL U NDERSTANDING These are to be attempted before the tutorial. They will not normally be covered in the tutorial, maybe, except for a quick review, time permitting. The answers are typically found in the textbook and lecture notes. 1. What is meant by the distortions in the tax system introduced by inflation? 2. What is the difference between CPI and GDP deflator? 3. What are the problems caused for the measurement of inflation by changes in the quality of goods and services over time? 4. What are the costs of inflation? Who, if any, benefits from inflation? 5. Distinguish between household savings and national savings. For Australia, what factors have contributed to a persistent decline in household savings over the past two decades?

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