4. Inflation is associated with several costs, as well as some benefits, to economies. a) State one cost of inflation that is expected, and briefly explain how that is a net negative to society as a whole. b) State one cost of inflation that is not expected, and briefly explain how that is a net negative to society as a whole. c) State one benefit of (expected) inflation to an economy.“

4. Inflation is associated with several costs, as well as some benefits, to economies. a) State one cost of inflation that is expected, and briefly explain how that is a net negative to society as a whole. b) State one cost of inflation that is not expected, and briefly explain how that is a net negative to society as a whole. c) State one benefit of (expected) inflation to an economy.“

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Measuring The Cost Of Living

Section: Chapter Questions

Problem 9PA

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The total price of purchasing a basket of goods in the United Kingdom over four years is: year 1=940, year 2=970, year 3=1000, and year 4=1070. Calculate two price indices, one using year 1 as the base year (set equal to 100) and the other using year 4 as the base year (set equal to 100). Then, calculate the inflation rate based on the first price index. If you had used the other price index, would you get a different inflation rate? If you are unsure, do the calculation and find out.
The index number representing the price level changes from 110 to 115 in one year and then from 115 to 120 the next year. Since the index number increases by five each year, is five inflation rate each year? Is the inflation rate the same each year? Explain your answer.
1. The index number representing the price level changes from 110 to 115 in 2019, and then from 115 to 120 in 2020. Since the index number increases by 5 this year, is five the inflation rate each year? Is the inflation rate the same each year?. NOTE: Explain and support the answer with calculations. 2. The total price of purchasing a basket of goods over four years is; year 1 - P940 year 2 - P970 year 3 - P1,000 year 4 - P1,070 Calculate two price indicates, one using year 1 as the base year (set equal to 100) and the other using the year 4 as the base year (set equal to 100). NOTE: Explain and support the answer with calculations.
Please just do question 4 please 3) Suppose that on January 1, 2019 a bank lends $20,000 to a person. The bank and the individual both agree that the real interest rate charged on the loan should be 10% and the loan is going to be totally paid ($20,000 plus interest), in a one-time payment, on December 31, 2020. Suppose the two parties to this transaction can perfectly foresee what the inflation rate for this period is going to be. Given this information, what is the nominal rate the Bank has to charge on this loan? Assume that the CPI is computed at the beginning of each year. According to US inflation data: The historical average CPI for 2019 is - 255.657 The historical average CPI for 2019 is - 258.811 The inflation rate during the period is: (258.811/255.657 -1) *100 = 1.233% Real Interest Rate = Nominal Interest Rate – Expected Inflation Nominal Interest Rate = Real Interest Rate+ Expected Inflation Nominal Interest Rate = 10% + 1.23% Nominal Interest Rate…
11. Suppose that the GDP deflator of a small country equals 200 at the end of 2018. If the inflation rate is 10% in 2019 and 5% in 2020, what is the value of the GDP deflator at the end of 2020? (round your answer to the nearest whole number) O. 215 O. 221 O. 231 O. 235 12. Most business economists and analysts prefer to use measures of "core" inflation, which typically remove which of the following volatile components? O. Energy O. Food O. Housing O. Energy and Food
Suppose that people expect inflation to equal 3 percent, but in fact, prices rise by5 percent. Describe how this unexpectedly high inflation rate would help or hurtthe following: (4)1.the government2. a homeowner with a fixed-rate mortgage3.a union worker in the second year of a labor contract4. a college that has invested some of its endowment in government bonds
1. In a specified year, nominal gross domestic product grew by 12 percent and real gross domestic product grew by 5 percent. What would be the inflation rate for this year? 7% -7% 8% 17% 2. Which of the following could result in simultaneous increases in unemployment and inflation? Which of the following could result in simultaneous increases in unemployment and inflation? An increase in the overall level of productivity A decrease in government spending A decrease in the money supply An increase in the expectations of future inflation 3. From 2017 to 2018, the unemployment fell from 4.3 to 3.9 percent while inflation fell from 3.2 to 1.4 percent. Which of the following is a valid reason behind these changes? Aggregate supply curve shifted to the right Aggregate supply curve shifted to the left Aggregate demand curve shifted to the right Aggregate demand curve shifted to the left 4. According to the law of diminishing marginal utility, which of the following choices…
In Zimbabwe the rate of inflation hit 90 sextillion percent in 2009, with prices increasing tenfold every day. At that rate, how much would a $3 loaf of bread cost five days later? Hint: Use the following equation to calculate future price: Future price = current price × inflation ratet, where t is the number of days in the future Instructions: Round your response to one decimal place. $ _____ million
just do 4 3) Suppose that on January 1, 2019 a bank lends $20,000 to a person. The bank and the individual both agree that the real interest rate charged on the loan should be 10% and the loan is going to be totally paid ($20,000 plus interest), in a one-time payment, on December 31, 2020. Suppose the two parties to this transaction can perfectly foresee what the inflation rate for this period is going to be. Given this information, what is the nominal rate the Bank has to charge on this loan? Assume that the CPI is computed at the beginning of each year. Nominal interest rate refers to the interest rate before taking inflation into account. Nominal can also refer to the advertised or stated interest rate on a loan, without taking into account any fees or compounding of interest. Therefore the interest charged by the bank is 10% only with no adjustments of inflation rate over the year. The amount of money charged by the bank as interest in one year equals to ; 20000$× 10/100= 2000$.…
20) Some inflation is actually considered good. Explain why that is.
3.In economics, what does the term "inflation" refer to?a) The rate at which a currency depreciatesb) A decrease in the overall price levelc) An increase in the overall price leveld) A decrease in the supply of money