BEA111 Introguction to Markets and the Economy - Assignment 2 Question 3 - (Total: 65 Marks) a. Consider the two tables below. Annual Growth (%) in CPl and CPI Groups March 2022 to March 2023 - Australia (Weighted average of eight capital cities) All groups CPI T0% Health Food and non-alcoholic beverages 8.0% Transport Alcohol and tobacco 4.4% Communication Clothing and footwear 3.2% Recreation and Culture Housing 9.8% Education Furnishings, household equipment and services 6.7% Insurance and financial services Source: ABS [2023) Consumer Price indes, Aystralia - March 2023, Tables 3 & 4 Annual Growth (%) in CPI and CPI Groups March 2023 to March 2024 - Australia [Weighted average of eight eapital cities) All groups CPI 3.6% Health Food and non-alcoholic beverages 3.8% Transpert Alcohol and tobacco 6.3% Communication Clothing and footwear 0.4% Recreation and Culture Housing 49% Education Furnishings, household equipment and services 0.2% Insurance and financial services Source: ABS (2024) Consumer Price Index, Austraiio - March 2024, Tables 38 4 (il Which goods (or CPI groups) rose faster (above 6%) than the All Groups CPI from March 2022 to March 20237 (4 marks) How did the price of the same group of items fare between March 2023 and March 247 What could explain the changes in the prices of these items, their sustainment, or even their increase? (5 marks) lgnoring any potential substitution, quality and new product bias in the CPI, explain whether the CPI measures the cost of living and, if so, for whom? (5 marks) 'What three groups of items had the lowest price growth between March 2023 and March 247 Provide an analysis of why these items had sluggish price growth. (& marks) The inflation rate, which was 7.0% from March 2022 to March 2023, is now 3.6% between March 2023 and March 24. Assuming households and businesses expected inflation to persist at 7% in 2024 while the actual inflation fell below 4%. Explain who is likely to be most negatively affected by this unexpected change and who may benefit from it in relation to income, assets, and debts. (8 marks) UNIVERSITY of TASMANIA University of Tasmania - CRICOS PROVIDER CODE 005868 BEA111 Introduction to Markets and the Economy - Assignment 2 b. To answer the questions below, assume the table below contains nominal $ per week and the CPI for Australia in December 2003 and December 2023. Average Weekly Unemployment Consumer Price Age Pension Earnings Benefits Index Dec-2003 $881.30 $206.55 $187.45 77.6 Dec-2023 $1,807.70 $485.75 $334.20 130.8 (i) In Dec-2023 dollars, how much were the Average Weekly Earnings, the Age Pension and Unemployment Benefits 20 years ago in Dec-2003? (12 marks) (ii) Calculate the real growth rate (using any suitable method) for the Average Weekly Earnings, the Age Pension and Unemployment Benefits from December 2003 to December 2023. (12 marks) (ili) Use your answers in (i) and (ii) to compare and discuss the growth of Average Weekly Earnings, the Age Pension and Unemployment Benefits in Australia over the last 20 years. (7 marks) (iv) Calculate the percentage proportion of Unemployment Benefits to the Age Pension in December 2003 and December 2023. Are there big differences between the two periods? Provide reasons as to what could have led to the outcome. (6 marks) UNIVERSITY of TASMANIA @ University of Tasmania - CRICOS PROVIDER CODE 005868