Let's consider the effects of inflation in an economy composed of only two people: Bob, a bean farmer, and Rita, a rice farmer. Bob and Rita both always consume equal amounts of rice and beans. In 2016, the price of beans was $1 and the price of rice was $3.

Question

Brisa Donaldson

Social Studies

29 October, 22:48

Let's consider the effects of inflation in an economy composed of only two people: Bob, a bean farmer, and Rita, a rice farmer. Bob and Rita both always consume equal amounts of rice and beans. In 2016, the price of beans was $1 and the price of rice was $3.

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Answers (2)

Know the Answer?

Willie Bryan · Answer 1

100% better off worsw off - 12.5 better of worse off the relative price of rice and beans

Katherine Clarke · Answer 2

Hello. This question is incomplete. The complete question would be:

"Let's consider the effects of inflation in an economy composed of only two people: Bob, a bean farmer, and Rita, a rice farmer. Bob and Rita both always consume equal amounts of rice and beans. In 2013, the price of beans was $1, and the price of rice was $3.

Suppose that in 2014 the price of beans was $2 and the price of rice was $6.

Inflation was ... "

Answer:

Inflation was 100%

Explanation:

Inflation is the persistent and widespread increase in price value. When inflation reaches zero we say that there has been price stability.

In other words, we can say that inflation is the rise in the prices of goods and services. It implies a decrease in the purchasing power of money. Inflation is measured by price indices, so we can say that if in 2013 the price of beans was $ 1 and the price of rice was $ 3, but in 2014 the price of beans increased to $ 4 and the price rice increased to $ 6, we can say that there was inflation of 100% of the price indices of these products.