question 30

Steadying energy prices helped to improve consumer sentiment in the US during January, according to the University of Michigan's index.

It rose for the third month in a row to 93.4 from December's final reading of 91.5, ahead of analysts' predictions.

Better job conditions and an optimistic outlook for US stocks during 2006 also helped push the index higher.

Consumer spending makes up two-thirds of US economic activity and is a key indicator of the health of the economy.

The dollar rose against the yen and firmed against the euro shortly after the report was issued on Friday.

Retail heating oil prices fell to a five-week low at $2.43 a gallon, down 1.7 cents from a week ago but up 46 cents from a year ago, EIA said.

On Thursday, the number of new jobless workers fell to 271,000 last week, its lowest level since April 2000, the Labor Department said.

Source: BBC News 20th Jan 2006 (adapted)



Questions:


1.What was the percentage increase in the index?
2% approx.

2.as the dollar rose against the yen this would make exports…(cheaper/more expensive)
more expensive

3.imports from Japan would now be…(cheaper/more expensive)
cheaper

4.If demand for imports is elastic, will the dollar’s rise be of great help/little help to Japanese exporters?

I think it will be of great help, because with dollar's rise, imports price for the US goes down. As price goes down, demand goes up ( assuming demand for imports is elastic), which will increase Japanese exports.

5.How much was retail heating oil a year ago?
$1.97

6.How much was retail heating oil a week ago?
$2.413

7.If demand for retail heating oil has not changed since a week ago, why would the price have fallen?
Retail price for oil is affected not only by demand. For instance, a change in availability and distance from supply, transportation costs causes change in price.

8.If a year ago demand for oil was 500,000 units and it is now 600,000 does this mean that the relationship between price and demand is direct, not inverse?
It is direct, but the numbers also prove that the demand for oil is inelastic. It means, that if price for oil rises, demand falls, but falls a little.