3. How do you compare the inflation rate in 2021 to the inflation rate in 2020? a The inflation rate in 2021 is lower by 4.46% than the inflation rate in the previous year. b. The inflation rate in 2021 is higher by 4.46% than the inflation rate in the previous year. c. The inflation rate in 2021 is exactly equal to the inflation rate in 2020. d. The inflation rate in 2021 cannot be compared to the inflation rate in 2020,

3. How do you compare the inflation rate in 2021 to the inflation rate in 2020? a The inflation rate in 2021 is lower by 4.46% than the inflation rate in the previous year. b. The inflation rate in 2021 is higher by 4.46% than the inflation rate in the previous year. c. The inflation rate in 2021 is exactly equal to the inflation rate in 2020. d. The inflation rate in 2021 cannot be compared to the inflation rate in 2020,

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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For each of the following years, determine the real interest rate. Find the difference between this rate and the desired real interest rate and explain how any difference affects borrowers and lenders. Write out percentage rates as whole numbers e.g. 5%. a. In year 1, the nominal interest rate is 9%, the inflation premium on loans is 5%, and actual rate of inflation is 6%. The real interest rate is 1%, the desired real interest is %, borrowers are (Click to select) and lenders are (Click to select) ♥ b. In year 2, the nominal interest rate is 10%, the inflation premium is 6%, and the actual rate of inflation is 4%. %, the desired real interest is %, borrowers are (Click to select) and lenders are (Click to select) v The real interest rate is c. In year 3, the nominal interest rate is 8%, the inflation premium is 4%, and the actual rate of inflation is 4%. |%, the desired real interest is %, borrowers are (Click to select) and lenders are (Click to select) - The real interest rate is 曲

K The nominal interest rate is 3 percent a year and the real interest rate is 6 percent a year. What is the inflation rate? The inflation rate is percent a year. >>> If your answer is negative, include a minus sign. If your answer is positive, do not include a plus sign.
Year CPI Year CPI 1989 124.0 2003 184.0 1990 130.7 2004 188.9 1991 136.2 2005 195.3 1992 140.3 2006 201.6 1993 144.5 2007 207.3 1994 148.2 2008 215.3 1995 152.4 2009 214.5 1996 156.9 2010 218.1 1997 160.5 2011 224.9 1998 163.0 2012 229.6 1999 166.6 2013 233.0 2000 172.2 2014 236.7 2001 177.1 2015 237.0 2002 179.7 2016 240.0
2. Why does the "quality/new goods bias" arise if the inflation rate is calculated based on a fixed basket of goods?
13. How does inflation affect people's standards of living and savings? Inflation is an (increase, decrease ) in the overall level of prices and has a ( positive , negative ) effect on people's standards of living and savings. People are forced to reduce their expenditures when the price of goods and services increases while nominal wages (also known as salaries) do not change. Savings are also affected by inflation because the (2 saved dollars is reduced. For example, a family with saving of $60,000 will be able to purchase (. more, fewer) goods and services with those dollars if the economy is experiencing inflation. ) of
49. Assume that the inflation rate over a ten-year period is 15% in each year. Which of the following groups is going to be hurt the most from this inflation? A. Banks who make variable interest rate loans. B. Persons who own lots of gold and land. C. Retired persons living on fixed incomes. D. Small business owners who can adjust their product prices.
Interest rates can be expressed in real or nominal terms. Which of the following is most correct? a.Because market rates are usually in nominal terms, cash flows will usually be in inflation-adjusted terms. b.Market rates are only meaningful in nominal terms, because an accurate adjustment for inflation is not possible. c.Real interest rates can be calculated as the difference between nominal rates and the inflation rate. d.Market rates are always expressed in real terms, because it is important that inflation be included in financial assessment.
2. How does a very high rate of inflation affect individual spending and saving? Explain your answer.
9 of 100 Inflation implies that the level of all prices OOOO increases and decreases sometimes stays the same decreases steadily increases steadily
Consider the following: Price Index in 2017 86 Price Index in 2018 100 Price Index in 2019 108 Price Index in 2020 120 Price Index in 2021 146 a. The base year is 2018 b. Calculate the inflation rate from 2018 to 2019. 8 % (Enter your response as a percentage rounded to two decimal places.) c. Calculate the inflation rate from 2019 to 2020. 11.11 % (Enter your response as a percentage rounded to two decimal places.) d. Assume the cost of a market basket in 2018 is $2,137.0. (Enter your responses rounded to one decimal place.) Calculate the cost of the same basket of goods and services in 2017. Calculate the cost of the same basket of goods and services in 2021.
The real interest rate is 1 the market rate of interest charged by banks. 2 the rate of interest that banks charge their best customers. 3 the nominal rate of interest minus the inflation rate that individuals expect. 4 the expected inflation rate minus the cost of borrowing.
Which of these groups benefits from inflation? a.Pensioners b.Fixed income earners c.Real property owners d.Local manufacturers who have fixed income