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in Grade 12 by Master (810k points)

RATE HIKE UNLIKELY EVEN AS INFLATION HITS FOUR-YEAR HIGH 

Statistics South Africa reported yesterday that the consumer price index (CPI) rose 6,4 per cent from August 2012 to August 2013. This is the highest inflation rate since August 2009. 
A weak rand, which pushed up the price of petrol by 32c a litre last month, was the major contributor to rising living costs. The petrol component in the CPI rose a massive 23 per cent in the last year. Petrol has a weighting of almost 6 per cent in the CPI basket. 

  1. Use the information in the extract to explain the link/relation between the consumer price index and inflation.
  2. Suggest ways in which consumers can reduce the effect of:
    > The weak rand
    > The increased petrol price
     

1 Answer

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1.

  • The consumer price index shows/measures a change/increase in the price/costs of a group of products and services over a year.
  • The consumer price index is the tool that is used to measure inflation.
  • Inflation is the annual percentage change in the consumer price index.
  • The inflation rate is the percentage at which the price of goods and services increases.
  • In the extract the price of goods and services rose 6,4 per cent over a year. Therefore that was the inflation rate for that year.

2.
2.1. Weak rand: Do not buy/buy fewer imported goods because they are more expensive /buy locally produced products.

2.2. Increased petrol price: 

  • Travel less in your own car/become part of a lift club/make use of public transport to reduce the money spent on personal transport.
  • Use cheapest mode of transport available.
  • Combine rides for errands to be done to reduce the amount of money spent on transport.
  • Walk where you can to reduce the amount of money spent on transport.
  • Buy locally produced goods because there are no/less transport costs involved and they will be cheaper

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