Macroeconomics 5th Edition by Olivier Blanchard

Exercise 6

High inflation around the world
a. Go to the Web site of the IMF (www.imf.org) and find the current issue of the World Economic Outlook. In the Statistical Appendix, look at the table that lists inflation rates. Find countries that have inflation rates of 10% or higher. Which country has the highest inflation rate, and what is the rate
b. Find Venezuela in the inflation table. How long has Venezuela had an inflation rate of more than 10% Look at the projected inflation rates for the current year and the next year. Does inflation show any signs of slowing in Venezuela
c. Venezuela is an oil producer, so its economy fluctuates with oil prices. Government tax revenues, in particular, depend heavily on the prosperity of the oil industry. With oil prices rising, Venezuela has increased government spending dramatically in recent years. Suppose oil prices fall in the future, but Venezuela does not reduce government spending. How would a fall In oil prices affect the budget deficit in Venezuela Given the effect on the budget deficit, and following the logic of this chapter, how would a fall in oil prices make a hyperinflation possible in Venezuela