3. 2019 2020 Price Quantity Price Quantity $2.50 $6.00 $3.00 $6.60 Nuts 40 tons 38 tons Berries 50 tons 52 tons a. Calculate the Consumer Price Index (CPI) for 2020 and the inflation rate for 2020. b. If the nominal wage was $22.5 for both 2019 and 2020 – what is the real wage in 2020? c. If the real rate of interest is 2% and expected inflation is 4% over the next year, what nominal interest rate will the banker charge on a one-year loan? If at the end of year, the actual rate of inflation is 13%, what will be the real rate of interest the banker realizes on the loan described? Why is this outcome harmful to an economy? d. Briefly, what is the substitution bias and how does it affect the CPI?

3. 2019 2020 Price Quantity Price Quantity $2.50 $6.00 $3.00 $6.60 Nuts 40 tons 38 tons Berries 50 tons 52 tons a. Calculate the Consumer Price Index (CPI) for 2020 and the inflation rate for 2020. b. If the nominal wage was $22.5 for both 2019 and 2020 – what is the real wage in 2020? c. If the real rate of interest is 2% and expected inflation is 4% over the next year, what nominal interest rate will the banker charge on a one-year loan? If at the end of year, the actual rate of inflation is 13%, what will be the real rate of interest the banker realizes on the loan described? Why is this outcome harmful to an economy? d. Briefly, what is the substitution bias and how does it affect the CPI?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2019 2020Commodities Price Quantity Price QuantityA 3 30 5 25B 4 20 5 30C 20 18 25 25a) Using the data given above, compute the Nominal and Real GDP for 2019, and 2020. (The base year is 2019). b) Compute the inflation rate for the year 2020 by using the GDP deflator.
7. 2019 2020 Price Quantity Price Quantity Rice $2.00 50 pounds $2.40 56 pounds Beans $.50 100 pounds $.90 89 pounds a. Assume that 2019 is the base year and calculate the consumer price index (CPI) for 2020. Show yourwork. b. The nominal wage was $28 in 2019, if it stayed the same in 2020, what is the real wage rate in 2020? c. Use the CPI to calculate the inflation rate for 2019? Show your work. d. What are the major flaws of using the CPI to measure inflation? List at least three.
5. Please calculate the CPI and the inflation rate using the information in Figure 1.2 (below). Year Units of Food 2007 2008 650 2009 2010 2011 Price of Food 14 21 19 26 20 Assume the base year is 2008 Units Price of Fuel of Fuel 780 11 9 14 18 13 Figure 1.2 Price in the base year Price in the current year CPI Inflation Rate (%) 11
Suppose that people in the small island country of Mudotch produce and consume rice and beans as follows. Rice Beans Year Quantity Price Quantity Price YearO 20 5 15 7 Year1 25 7 17 10 Year2 35 9 20 16 1. Calculate the consumer price index (CPI) in each year using YearO as the base year. Show your work. 2. Using your CPI in (a), what is the inflation rate in Year1 and Year2? Show your work. 3. Calculate the GDP deflator in each year using YearO as the base year. Show your work. 4. Using your GDP deflator in (c), what is the inflation rate in Year1 and Year2? Show your work. 5. Is the inflation rate in Year2 the same in (b) and (d)? Explain why or why not.
Sally has a credit card balance of $1,000. The credit card company charges a nominal interest rate of 16 percent a year on unpaid balances. The inflation rate is 6 percent a year. Calculate the real interest rate that Sally pays the credit card company. The real interest rate that Sally pays the credit card company is ------- percent a year.
Calculate the rate of inflation or delation between 2014 and 2015.
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10. Under the following conditions, estimate the price of an item during year 3 A. If it is estimated that its price at the beginning of the analysis is $8.50 and suffers an inflation of 5.5% per year. B. If it is estimated that its price at the beginning of the analysis is $8.50 and it suffers an inflation in year 1 of 3%, in year 2 of 5% and in year 3 of 2%. C. If it is estimated that its price in the first year of the analysis will be $8.50 and it suffers an inflation of 5% per year. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
2a. Compute the price index for each year. Use the first year as the base year. What was the inflationrate between the two years.Item Quantity Unit Price-Last Year Unit Price-This YearCoffee 20 pounds $3.00 $4.00Tuition 1 year 4,000.00 7,000.00Pizza 100 pizzas 8.00 10.00VCR rental 75 days 15.00 10.00Vacation 2 weeks 300.00 500.00
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