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 20^th Jan 2006 (adapted)

Questions What was the percentage increase in the index? as the dollar rose against the yen this would make exports…(cheaper/more expensive) imports from Japan would now be…(cheaper/more expensive) If demand for imports is elastic, will the dollar’s rise be of great help/little help to Japanese exporters? How much was retail heating oil a year ago? How much was retail heating oil a week ago? If demand for retail heating oil has not changed since a week ago, why would the price have fallen? 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?