Final answer:
In the given scenario, Bob and Rita's economy experienced a 100% inflation rate from 2013 to 2014. Inflation is the general increase in prices and decrease in the purchasing power of money. Different rates of inflation have various impacts on the economy, with high or hyperinflation being potentially damaging.
Step-by-step explanation:
In the hypothetical scenario of Bob the bean farmer and Rita the rice farmer, we observe an economy with just these two goods. In 2013, the price of beans was $1 and the price of rice was $3. By 2014, these prices rose to $2 for beans and $6 for rice. To calculate the inflation rate, we can compare the price changes of these goods between the two years. Since both the price of beans and rice have doubled, it suggests that the inflation rate is 100%.
Inflation is a phenomenon where there is a general increase in prices and decline in the purchasing power of money over time. When we talk about inflation in the real world, we often reference the Consumer Price Index (CPI) which measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
From a broader economic perspective, different rates of inflation can have varying impacts on an economy. Low to moderate inflation (around 2% to 4% per year) is quite common and typically manageable. However, high rates of inflation, or even hyperinflation, can be very damaging, leading to significant declines in purchasing power and economic instability.