DSE 20-04

Study the following information of an economy.

(a) Calculate the inflation rate in 2019. (1 mark)

(b) Explain ONE difference between using CPI and GDP deflator to measure the change in the price level.

(2 marks)

(c) ‘The continuous open market purchase of government bonds by the central bank is the cause of inflation in the economy.’ Justify the statement with reference to the classical quantity theory of money.

(4 marks)