4. Inflation and interest ratesThe following table shows the average nominal interest rates on six-month Treasury bills between1971 and 1975, which determined the nominal interest rate that the U.S. government paid when itissued debt in those years. The table also shows the inflation rate for the years 1971 to 1975. (Allrates are rounded to the nearest tenth of a percent.)Year19711972197319741975INTEREST RATE (Percent)Source: "FRED Economic Data," Federal Reserve Bank of St. Louis, last modifiedSeptember 23, 2019, accessed September 24, 2019, https://fred.stlouisfed.org.On the following graph, use the orange points (square symbol) to plot the nominal interest ratesfor the years 1971 to 1975. Next, use the green points (triangle symbol) to plot the real interestrates for those years.8.07.06.05.04.03.0-1.0-2.0-3.01970Nominal Interest Rate Inflation Rate(Percent)4.54.57.28.06.11971o 1971o 1972o 1973o 1974o 197519721973YEAR(Percent)4.23.36.311.09.1197419751976Nominal Interest RateAAccording to the table, in which year did buyers of six-month Treasury bills receive the highest realreturn on their investment?Real Interest Rate

Real interest rate is inflation adjusted nominal interest rate. The real interest rate is calculated…

4. Inflation and interest rates The following table shows the average nominal interest rates on six-month Treasury bills between 1971 and 1975, which determined the nominal interest rate that the U.S. government paid when it issued debt in those years. The table also shows the inflation rate for the years 1971 to 1975. (All rates are rounded to the nearest tenth of a percent.) Year 1971 1972 1973 1974 1975 Nominal Interest Rate Inflation Rate (Percent) 4.5 4.5 7.2 8.0 6.1 (Percent) 4.2 3.3 6.3 11.0 9.1

4. Inflation and interest rates The following table shows the average nominal interest rates on six-month Treasury bills between 1971 and 1975, which determined the nominal interest rate that the U.S. government paid when it issued debt in those years. The table also shows the inflation rate for the years 1971 to 1975. (All rates are rounded to the nearest tenth of a percent.) Year 1971 1972 1973 1974 1975 Nominal Interest Rate Inflation Rate (Percent) 4.5 4.5 7.2 8.0 6.1 (Percent) 4.2 3.3 6.3 11.0 9.1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Calculating and categorizing inflation This table indicates the historical level of the Consumer Price Index (CPI) for the United States for 2006,2007, and 2008. Complete the table by (1) selecting the inflation rates for 2007 and 2008, and (2) indicating for each year whether there has been inflation, deflation, or hyperinflation. Year CPI Inflation rate Change in Price Level 2006 201.6 2007 207.3 2007 215.3 What rates of inflation for 2009 would be consistent with disinflation between 2008 and 2009? Check all that apply. 13.9% 3.7% 3.9% 3.8% What rates of inflation for 2009 would be consistent with hyperinflation ? Check all that apply. 100.0 % -3.9% 120.0% 15.0%
The table below shows the annual change in the average nominal wage and inflation rate since 2008. a. Compute the percentage change in real income for each year shown in the table. Instructions: In part a, round your answers to two decimal places. In parts b and c, enter your answers as a whole number. If entering a negative number, include a minus sign. Percentage Changes in Nominal Income and Prices Year 2008 2009 2010 2011 2012 2013 Annual Inflation Rate (percent) 3.92% -0.36 1.66 3.24 2.11 1.48 Annual Nominal Wage Growth (percent) 0.34% -1.24 -0.76 1.4 2.76 2.28 Annual Real Wage Growth (percent) (0.39) x % (0.88) ♥ 2.42 x 9.87 x b. Of the years listed above, the paycheck of the average worker declined in 2 c. Of the years listed above, the purchasing power of the average worker declined in of the six years. 4 of the six years. d. The average real income of households can increase whether the nominal wage increases or decreases
8. The price level was 118.3 in 1988, 124.0 in 1989, and 130.7 in 1990. What were the rates of inflation for 1989 and 19907? If people expect the rate of inflation to be the average rate of inflation for the previous 2 years, what was the expected rate of inflation for 1991? The nominal interest rate in 1991 was 5.4 percent. What was the real interest rate?
Suppose you'll have an annual nominal income of $20,000 for each of the next three years, and the inflation rate is 5 percent per year. Hint: Present value = Future value = (1 + Growth in prices)* = Real value of next year's income = Next year's income ÷ (1+ Growth in prices) Instructions: Round your responses to the nearest whole dollar. a. Find the real value of your $20,000 salary for each of the next three years. Year 1: $ Year 2: $ Year 3: $ b. If you have a COLA in your contract, what is the real value of your salary for each year? Year 1: $ 19047 Year 2: $ 18144 Year 3: $ 17276
14. If the nominal interest rate is 8% and the inflation rate is 3%, the real interest rate A) 11% B) 5% C) -5%. D) 8/3 = 2.67% E) cannot be determined from the information given %3!
8. Real and nominal interest rates: Suppose the real return on investing in a machine is 5% and the inflation rate is 4%. 1. According to the Fisher equation, what should the nominal interest rate be? 2. Suppose bank A charges a nominal interest rate on loans equal to 8%. What happens? 3. Suppose bank B advertises its nominal rate on savings accounts as 12%. What happens?
4. In which of these situations is the real interest rate NEGATIVE? A) The nominal interest rate is 3% and the inflation rate is 4% B) The nominal interest rate is -5% and the inflation rate is -6% C) The nominal interest rate is 2% and the inflation rate is -1% D) The nominal interest rate is 4% and the inflation rate is 4%
4. Inflation and interest rates The following table gives the average nominal interest rates on six-month Treasury bills spanning the years 1997 and 2001, which determined the nominal interest rate paid by the U.S. government when it issued debt in that time period. The table also gives the inflation rate for the years 1997 to 2001. (All rates rounded to the nearest 0.1 percent.) Year 1997 1998 1999 2000 2001 Nominal Interest Rate (Percent) 5.2 4.8 4.8 5.9 3.4 Inflation Rate (Percent) 2.3 1.5 2.2 3.4 2.8 Source: "FRED Economic Data Federal Reserve Bank of St. Louis, last modified September 23, 2015, accessed September 24, 2019, he//fred.stiouisfed.org.
The table below shows the annual change in the average nominal wage and inflation rate since 2008. a. Compute the percentage change in real income for each year shown in the table. Instructions: In part a, round your answers to two decimal places. In parts b and c, enter your answers as a whole number. If entering a negative number, include a minus sign. Percentage Changes in Nominal Income and Prices Year 2008 2009 2010 2011 2012 2013 Annual Inflation Rate (percent) 3.78% -0.39 1.6 3.09 2.02 1.42 Annual Nominal Wage Growth (percent) 0.31% -1.1 -0.69 1.27 2.46 2.07 Annual Real Wage Growth (percent) b. Of the years listed above, the paycheck of the average worker declined in c. Of the years listed above, the purchasing power of the average worker declined in of the six years. d. The average real income of households can increase whether the nominal wage increases or decreases of the six years.
3b. Suppose a country has a money demand function (M/P)d kY, where k is a constant parameter. The money supply grows by 12 percent per year, and real income grows by 4 percent per year. What is the average inflation rate?
The ___ is the nominal interest rate minus the rate of inflation. Question 13 options: real GDP real interest rate annualized interest rate nominally adjusted
Sally worked hard all year and put her savings into a mutual fund that paid a nominal interest rate of 4 percent a year. During the year, the CPI increased from 185 to 190. What was the real interest rate that Sally earned? 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.