(a)A piece of jewellery was worth $15,000 in 1965, and has increased in nominal terms by 2.5 times between 1965 and 2005. CPI in 1965 was 85 and by 2005 stood at 160.

(i)Calculate the rate of inflation between 1965 and 2005.(2 marks)

(ii)If this piece of jewellery had risen in price at the rate of inflation, what would it be worth in 2005?(2 marks)

(iii)Your great-aunt Theresa thinks the jewellery is worth much more in 2005 than it was in 1965. Do you agree or disagree with her? Justify your answer. (2 marks)

(b)Christina's boss has just given her a 2% pay rise this year, yet this still reduces her standard of living. How can this be so? Explain your thought process with respect to the concept of wages.(4 marks)

(a)The impact of COVID-19 threw the economy of Symposia into recession. The finance ministry has advised the government to engage in a borrowing spree to kickstart the economy. The finance ministry has advised the government to engage in a borrowing spree to kickstart the slowing economy. It suggests that this borrowing will increase the level of government debt from $10 billion to $14 billion, but that given interest rates are low, that this is a good time to update both the weapons held by the military and to upgrade the fleet of government cars while simultaneously boosting the economy, not just immediately but also into the future. The President of Symposia has asked you, as her chief economic advisor, for your views. In particular, she wishes to know the following:

(i)Would spending this money on weapons and cars boost the economy immediately and into the future? Your advise on this is ____________________ (provide your answer and justification on both the immediate and future impact. Feel free to use external resources to assist you in your answer if you prefer).(5 marks)

(ii)She has also heard that rising debt is bad for the economy, so this initial boost in government expenditure will eventually lead to an even worse economic outlook. She wants to know your opinion on this. Your advise is ____________________ (provide your answer and justification. Feel free to use external resources to assist you in your answer if you prefer).(5 marks)