If the CPI is currently 202, what does this tell you about inflation between last year and this year?
A) Inflation in the economy between this year and last year was 2.
B) There was deflation in the economy between this year and last year.
C) The CPI measures only the level of prices in a given year, not the percentage change in prices from one year to the next.
D) Inflation in the economy between this year and last year was 102.
Question 2
Consider the following T-account for a bank:
Assets Liabilities
Reserves 1,000 Deposits 5,000
Loans 4,000
If the required reserve ratio is 20 percent and the bank is holding no excess reserves, the bank at this point can make no more loans.
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