If inflation is expected to be higher, O lenders will decrease nominal interest rates O lenders will increase nominal interest rates O lenders will increase real interest rates O lenders will decrease real interest rates
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- A fixed-rate mortgage has the same interest rate over the life of the loan, whether the mortgage is for 15 or 30 years. By contrast, an adjustable-rate mortgage changes with market interest rates over the life of the mortgage. If inflation falls unexpectedly by 3, what would likely happen to a homeowner with an adjustable-rate mortgage?Which of the following describes the interest rate on an investment after calculating the impact of inflation?O NominalO RealO FinancialO ProfitUnder which of the following circumstances is inflation most costly to an individual? O The inflation rate has averaged 5% for each of the last five years and an individual has received a 6% pay raise for each of the last five years. An individual's wage is indexed to the rate of inflation. Joe has a contract at work that guarantees him a cost of living adjustment equal to the going rate of inflation. Last year inflation was 10%. O Joe is a minimum wage earner and the minimum wage has not changed for the last five years. * Previous Next 可 e ASUS
- You open a savings account with your local bank and the bank pays you a nominal interest rate of 2%, while the inflation rate is expected to be 1% for the year. Therefore, the real interest rate you expect to earn on your savings account will be 3%. O True O FalseWhich of these statements best describes what inflation rate is? Oa Inflation rate is useful for knowing the labor force Ob. Inflation rate is used in determining profits Oc Inflation rate is calculated from consumer price index d. Inflation rate is expressed in percentage termsIf there is 5% inflation this year and Joe the Consumer's wage rate also goes up by 5%, he will be neither better off nor worse of as a result. T/F/U? 2.
- The Consumer Price Index (CPI) exhibits four known biases. Three of these biases occur, because the CPI is calculated based on a basket of goods year-to-year. This calculation to compare CPI values year-to-year and calculate the inflation rate. approach makes it Ofixed; more difficult O variable; more difficult O fixed; easier O variable; easierSally 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.There is a persistent fear that there will be a high level of deflation. Many economists arn that it may be worse for the economy than if there is high inflation. Suppose that Herb is in debt and has to pay a 5.50% nominal interest rate. He expected inflatin to be 3.00%. Instead, inflation is -2.00% deflation. What is the real interest rate that Herb expected to pay? What is the real interest rate that Herb is actually paying? Because the economy is experiencing deflation of -2.00% nstead of inflation of 3.00%. Herb's real interest rate, compared t what he expected to pay, has A. decreased, so Herb feels poorer. B. decreased, so Herb feels richer. C. increased, so Herb feels richer. D. increased, so Herb feels poorer.
- • The following table shows the price of a specific stereo receiver for a five-year period. o Using year 3 as the base year, calculate the price index for each year. o What is the accumulated rate of inflation from year 1 to year 4? o What is the most recent annual rate of inflation? Year. Price. Price index 1 $ 88 2 $100 3 $120 4 $132 5 $140www.m WO The country of Swedway monitors price changes on several hundred goods in 4 categories: food, housing, transportation and household goods, in accordance with the following CPI table: Calculate the contribution to inflation for each category and determine the overall inflation rate in Swedway. CATEGORY WEIGHT (%) PRICE CHANGE (%) CONTRIBUTION TO INFLATION RATE Food 40 10 Housing 30 15 Transportation 20 20 Household Goods 10 25 Total 100The interest rate on Real Return Bonds is a direct measure of Select one: O a. the rate of deflation O b. the rate of inflation O c. the real interest rate O d. the nominal interest rate