1 A country's CPI was 100 last year and 95

1 

By using formula

inflation rate =CPIcurrent year-CPIprevious year/CPI previous year×100

Inflation rate=(95.7-100)/100×100=-(4.3/100)×100=-0.043×100=-4.3%

Therefore answer b.-4.3 percent

2 

Ans. Ricardian equivalence suggests that when a government tries to push the economy by taking increasing debt spending of the public and its demand of goods and services remains unchanged and savings increases. This is because public fears that government will increase the tax rate in future to pay off the debt. As such they focus more on savings rather than consumption.

Therefore Ricardian equivalence on country’s debt level will have downward effect on consumer spending.

Since Ricardian holds on to the perspective that government spending to push economic activity will have no impact on consumer spending does not hold much water in current economic situation.

Also the concept of people holding on to their money in the form of savings to pay off the higher taxes in future also does not hold much water in current global economic climate .

Hence this theory has been strongly dubbed as unrealistic in capitalist markets. In fact we see the economic functioning of countries across the globe is generally engineered by debt. This results in infrastructural development, connectivity and other priorities of the government to revamp the economy. This also results in employment, production and consumerism. As such Ricardian equivalence theory does not hold much relevance in today’s economic situation.

3 

True, increased competition affects industry composition by reducing the fraction of neck-and-neck sectors, and overall, competition increases aggregate innovation. All these results are consistent with the predictions of the step-by-step innovation model.

Competition policy includes regulatory reform policywhich eases market entry barriers and guarantees equal businessopportunities to market participants; injecting market principles intothe process of privatization of state-run enterprises; playing the role of competition advocate in order to ensure sectoral policies follow market principles ; and developing a culture of competition by instilling a competition mindset into the players in the market.