QUESTION

Exercise 1 A. Assume that in an economy only 3 goods are produced and consumed: beans, fruit, and sh. Suppose that on January 1, beans sold for $2.50 per pound, sh was $3.00 per pound, and fruit was $1.50 per pound. At the end of the year, beans prices had increased to $5.00 per pound, but uit prices stayed at $1.50 per pound, and sh prices had actually fallen to $2.00. What happened to the overall CPI? What happened to the ination rate? B. Explain the relationship between new goods bias, CPI and GDP measures of ination. Exercise 2 I Below is the natural unemployment rate in 2020 for U.S., Canada, and the European Union Area: 0 Natural unemployment rate in US. was 4.4 % 0 Natural unemployment rate in Canada was 9.75 %. 0 Natural unemployment rate in the European Union Euro Area was 19 %. What might explain the lower natural rate of unemployment in United States than in Canada and Western European countries? Explain with words + graph