Question 4 CPI, Inflation, Real v Nominal 80 marks Consumer Price Index Average Weekly Total Earnings (CPI) AWTE) (CPI = 100 in 2012-13) ($ per week) Hobart Australia Tasmania Australia Mar-2021 118.5 117.9 Jun-2021 119.8 118.8 $1, 130 $1,306 Sep-2021 120.2 119.7 Dec-2021 122.9 121.3 $1,127 $1,329 Mar-2022 125.4 123.9 Source: Australian Bureau of Statistics, 2021, 6401.0 Consumer Price Index, Australia, TABLES 1 and 2. CPI: All Groups, Index Numbers and Percentage Changes, ABS, Canberra. a. Calculate, compare and interpret the annual inflation rate in March 2022 for Hobart and Australia. (15 marks) b. Calculate the quarterly inflation rate for Hobart Australia in December 2021 and March 2022. When did Hobart experience its largest increase in prices? Was this the same for Australia as a whole? (15 marks) C. Using the fact that the base year for the CPI is 2012-2013, interpret the CPI for March 2022 for Australia and Hobart. (10 marks) d. Calculate the real AWTE for Tasmania and Hobart for the June and December quarters in 2021. Did real or nominal AWTE for Tasmania or Australia rise or fall in the 6-months to December? (15 marks) e Explain what inflation does to the real value of debt and assets? (5 marks) f. Explain who is likely to be negatively affected by inflation. Explain if anyone is likely to be positively affected by inflation. (5 marks) g. Distinguish between core and headline inflation. Explain which gives a better indication of the current increase and prices and which is better for long term planning and why this is so. (5 marks) h. Ignoring any potential substitution, quality and new product bias in the CPI, Ignoring any potential substitution, quality and new product bias in the CPI, explain whether the CPI measures the cost of living and if so for who? Explain why for some groups of people why their cost of living might be different to the CPI. (5 marks) Explain whether or not, two of the traditional costs of inflation, "menu-costs" and "shoe-leather costs", are still significant in 2020s as they were in the 1970s