Price Quantity ofHot Chocolate Demanded Quantity o…

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  Price Quаntity оfHоt Chоcolаte Demаnded Quantity ofHot Chocolate Supplied $1.00 750 cups 525 cups $1.50 700 cups 550 cups $2.00 650 cups 575 cups $2.50 600 cups 600 cups $3.00 550 cups 625 cups Suppose that the price of hot chocolate is $2 per cup. As a result, there will be a ____.

Tаble 1 prоvides infоrmаtiоn required for the cаlculation of a consumer price index (CPI). It shows a typical basket of goods purchased by the citizens of Country Alpha and the prices of these goods for two consecutive years. Assume 2015 is the base year, when the cost of the typical basket was $45.00.   (e) Outline how monetary policy is used to lower the inflation rate in an economy.[2]

c. [Mаximum mаrk: 4] Unwаnted cоnsequences оf United States–China trade war In оrder to reduce its trade deficit, the United States (US) announced tariffs of 25 % on imports of steel and 10 % on imports of aluminium from various countries in March 2018. The US government also accused China of unfair trade practices and wants China to import more American-made products. In July 2018, the first tariff on Chinese imports took effect and the Chinese government retaliated with a ban on US soybeans. In response, the US threatened to impose additional tariffs on imports worth almost US$300 billion, including a 25 % tariff on cars and car parts. This would be very damaging to the Chinese economy, which is slowing down, and workers in some provinces have become unemployed. The trade war has also caused anxiety in the European Union and Australia, which are likely to see their trade with China affected. Global trade in goods has been slowing, with exports from trade-dependent nations (such as Japan and South Korea) to China declining. Economists have estimated that other countries could see exports to China drop by as much as 20 %. As of early 2019, Germany’s economy is almost in recession, partly because of the slowing Chinese economy. If the US imposes its threatened car tariffs, a recession in Germany is inevitable. In the US, concerns were raised that the trade war has reduced business confidence. The decrease in demand from China, which results partly from trade tensions, has hurt the profits of US companies such as Apple Inc. and Caterpillar Inc. On the other hand, consumers and producers in the US are switching to domestically-produced goods due to the higher prices of some imported products from China. In an attempt to reduce the risk of a sharp economic slowdown, China’s central bank eased monetary policy. Economic data showed that small- and medium-sized manufacturing companies saw the largest negative impact from the slowdown of its economy. Therefore, the government changed the definition of a “small business”, allowing more firms to have access to subsidized lending by state-owned commercial banks. As the impacts of tax cuts enacted in the US in 2017 are disappearing, the US government is becoming more aware that the US economy is hurt by the trade war and is heading towards slower growth. [Source: Adapted from Tang, F. and Wang, O., 2019. China prepares for testing 2019 by freeing up US$210 billion in latestmove to boost ailing economy. South China Morning Post, https://www.scmp.com/economy/china-economy/article/2180758/china-prepares-testing-2019-freeing-us210-billion-latest-move; and Donnan, S., 2019. U.S.-ChinaNegotiations Risk Shutting Out the Rest of the World. Bloomberg Businessweek, https://www.bloomberg.com/news/articles/2019-02-28/u-s-china-negotiations-risk-shutting-the-rest-of-the-world-out. Used with permission of BloombergLLP Copyright © 2021. All rights reserved.] (d) Using an AD/AS diagram, explain the desired impact of China’s “eased monetary policy” on its economic growth (paragraph [5]).[4]