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Q. Define inflation. Assume which you live in a simple economy in which only 3 goods are produced also traded: fish, fruit, also meat. Assume which on January 1, 2007, fish sold for $2.50 per pound, meat was $3.00 per pound also fruit was $1.50 per pound. At the end of the yr, you discover which the catch was low also which fish prices had increased to $5.00 per pound, but fruit prices stayed at $1.50 also meat prices had actually fallen to $2.00. Can you say illustrate what happened to the overall price level? How might you construct a measure of the change in the price level? Illustrate what additional information might you need to construct your measure?
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