f the real value of an item bought ten years ago is less than it’s nominal value at that time, what can one infer about the change in the overall price level during this ten year period?
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If the real value of an item bought ten years ago is less than it’s nominal value at that time, what can one infer about the change in the overall price level during this ten year period?
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- Calculate the nominal rental price of capital Md=(.67Y-0.5r)P Ms=100 P= 0.96 Y=150 r= -6 supply of capital (Ks) = 100 Demand for capital (Kd)= 200-4(R/P) Real rental price of capital (R/P)= 25Suppose an economy consumes only two goods: food and entertainment. The following table shows quantities consumed and prices for three years: Year 0 (the base year), Year 1, and Year 2. QUESTION; compute inflation rates (from year 0 to year 1 and from year 1 to year 2) based on GDP deflator Item Year 0 Year 1 Year 2 Quantity (units) Price ($ / unit) Quantity (units) Price ($ / unit) Quantity (units) Price ($ / unit) Food 50 5 75 6 80 4 Entertainment 100 12 110 11 115 14When a nominal value is unchanged it must be true that prices have remained unchanged. Select one: True False
- Suppose that before the end of the year a typical consumer purchased 125 apples, 60 bananas, and 85 oranges. Year 1 Year 2 Price of apple Price of banana 0.75 $ 0.90 0.20 0.45 Price of orange 24 0.25 $ 0.60 What is the price index for year 2, using year 1 as the base year (round to the nearest full number)?If the price level increases by 70% in one year, then for the nominal rate of interest to be 10%, what is the real rate of interest?A typical consumption basket in Canada can be purchased for the following prices in two years: in Year 1, the price is $925; in Year 2, the price is $975. Calculate the Consumer Price Indexes for each year, it two ways: one using Year 1 as the base year, and the other using Year 2 as the base year. Then, calculate two inflation rates based on the two sets of price indexes you calculated. Compare the two inflation rates and discuss your result.
- Nelson, a management trainee at a large New York-based bank, is trying to estimate the real rate of return expected by investors. He notes that the 3-month T-bill currently yields 8 and has decided to use the consumer price index as a proxy for expected inflation, if the CPI is currently 2.5. What is the estimated real rate of interest?Congratulations! Your boss has given you a raise. However, you want to know whether your purchasing power has actually increased, since inflation is rising as well. The table below gives you data for wages and the Consumer Price Index (CPI) for the last two years. Year 1 Year 2 Wage ($/day) $2,000 $2,100 The nominal percentage increase in your wage is%. (Round your answer to one decimal place.) The real percentage increase in your wage is%. (Round your answer to one decimal place.) CPI 115 128.8Suppose the price level reflects the number of dollars needed to buy a basket of goods containing one can of soda, one bag of chips, and one comic book. In year one, the basket costs $9.00. NOTE: the first drop down question options are (inflation or deflation), the second drop down question options are (-11.11% or -1.25% or 1.00% or 1.11% or 12.50%), the third drop down question options are (0.11 or 0.13 or 4.5 or 8 or 9), the fourth drop down question options are (0.11 or 0.13 or 4.5 or 8 or 9), the fifth drop down question options are (rises or falls or remains the same)
- 1) If nominal GDP is $7636.0 billion and the GDP deflator is 130.2, then what is real GDP? 2) If the Consumer Price Index rose from 166.3 in 1985 to 380.1 in 2010, what would be the inflation rate over this period?Calculate the nominal wage rate Md=(.67Y-0.5r)P Ms=100 P= 0.96 Y=150 r= -6 Real wage= 20Lynda and Tom have data on the nominal price of a liter of milk in Germany in 1990 and 2010, respectively. They would like to calculate the present increase in the real price of milk over this time interval. To this end, Lynda uses a consumer price index (CPI) with the base year set at 1995 and Tom uses a CPI with the base year set at 2005. There was positive inflation between 1995 and 2005 of 3%. Based on this, it can be concluded:a) Tom and Lynda will reach the same calculation of the percentage increase in the real price of milkb) nothing can be concluded about their calculations without knowing the growth rate of real GDP between 1990 and 2010c) the nominal price of milk decreased between that 2 yearsd) Tom’s calculation of the percentage increase in the real price of milk will be higher than Lynda’se) Lynda’s calculation of the percentage increase in the real price of milk will be higher than Tom’s
