On the following graph, use the orange points (square symbol) to plot the nominal interest rates for the years 2014 to 2018. Next, use the greenpoints (triangle symbol) to plot the real interest rates for those years.3.0Nominal Interest Rate2.0Real Interest Rate1.0-1.0-2.02013201420172018201920152016YEARAccording to the table, in which year did buyers of six-month Treasury bills receive the highest real return on their investment?20142015201620172018INTEREST RATE (Percent) 4. Inflation and interest ratesThe following table shows the average nominal interest rates on six-month Treasury bills between 2014 and 2018, which determined the nominalinterest rate that the U.S. government paid when it issued debt in those years. The table also shows the inflation rate for the years 2014 to 2018. (Allrates are rounded to the nearest tenth of a percent.)Inflation RateNominal Interest Rate(Percent)(Percent)Year20140.11.620150.20.120160.51.320171.12.120182.12.4Source: "FRED Economic Data," Federal Reserve Bank of St. Louis, last modified September 23, 2019, accessed September 24, 2019, https://fred.stlouisfed.org.

Real interest rate can be calculated as:Real interest rate = Nominal interest rate – Inflation…

Answered: On the following graph, use the orange…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Given the following table about the level of the consumer price index (CPI), perform calculations and show your work in the coming parts of the question. Consumer Price Index Year Consumer Price Index 2015 139.5 2016 144.7 2017 2018 160.1 2019 168.1 Calculate the inflation rate in 2016. If the inflation rate was 6 percent in 2018, calculate the CPI in 2017.
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?
Question 3 Use the following table to answer the questions below 2015 Quantity Price $4.0 $4.1 $4.5 2016 2017 2018 || Books Coffee Insurance 7 1. If 2017 is the base year, what is the inflation rate between 2015-2016? 2. If 2017 is the base year, what is the inflation rate between 2017-2018? 3. If 2016 is the base year, what is the inflation rate between 2016 and 2017 and the inflation rate between 2017 and 2018? 4. If 2015 is the base year, what is the average inflation rate for the period 2015 to 2018? 12 8 $4.5 $4.8 $5.4 $4.6 $5.1 $5.6 $5.0 $5.5 $6.0
1. Calculating inflation using a simple price index Consider a fictional price index, the College Student Price Index (CSPI), based on a typical college student's annual purchases. Suppose the following table shows information on the market basket for the CSPI and the prices of each of the goods in 2019, 2020, and 2021. The cost of each item in the basket and the total cost of the basket are shown for 2019. Perform these same calculations for 2020 and 2021, and enter the results in the following table. Notebooks Calculators Large coffees Energy drinks Textbooks Total cost Price index Price Cost Price Quantity in Basket (Dollars) (Dollars) (Dollars) 10 15 50 7 1 100 100 150 1 150 50 2 100 10 100 1,000 5 5 5 5 Suppose the base year for this price index is 2019. Between 2019 and 2020, the CSPI increased by 2019 1,400 100 110 1 3 120 5 5 2020 Cost (Dollars) In the last row of the table, calculate and enter the value of the CSPI for the remaining years. Price (Dollars) 11 140 1 4 150 5 5 %.…
2. The inflation-unemployment relationship The following graph shows the combinations of unemployment and inflation that existed in the United States for selected years between 1961 and 1969. Click on any blue point (circle symbol) on the graph to get its exact coordinates. You can also use the black point (cross symbol) to find the coordinates of other points along the curve. (Note: You will not be graded for any adjustments made to the graph.) INFLATION RATE (Percent) 1989 5.0 4.5 1988 4.0 3.5 1967 3:0 2.5 2.0 1965 1964 1.5 1983 1961 1.0 0.5 0 3.0 3.5 40 45 5.0 5.5 6.0 8.5 7.0 UNEMPLOYMENT RATE (Percent) What happened to the inflation rate between 1965 and 1969? The inflation rate decreased from 1.9% to 1.5%. The inflation rate increased by 3 percentage points. The inflation rate decreased by 2 percentage points. O The inflation rate increased from 2.9% to 4.3%. ? If the unemployment rate had been 4.0% during the 1960s, the inflation rate would most likely have been:
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%
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.
The table below has in the first column the expected inflation rate and the second column contains the actual inflation rate. Using your knowledge about real and nominal rates, which years are better for borrowing compared to lending? Explain your reasoning. Year Expected Inflation (%) Actual Inflation (%) 2011 3.76 3.14 2012 1.62 2.07 2013 1.52 1.47 2014 1.72 1.62 2015 0.08 0.12 2016 1.00 1.27 2017 2.06 2.14 2018 2.73 2.43 2019 1.77 1.81 2020 1.37 1.25
4. Inflation and interest rates The following table shows the average nominal interest rates on six-month Treasury bills between 1997 and 2001, 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 1997 to 2001. (All rates are rounded to the nearest tenth of a percent.) Year 1997 1998 1999 2000 2001 Nominal Interest Rate (Percent) 5.2 4.8 4.8 5.9 3.4 6.0 Inflation Rate (Percent) 2.3 1.5 2.2 3.4 Source: "FRED Economic Data," Federal Reserve Bank of St. Louis, last modified September 23, 2019, accessed September 24, 2019, https://fred.stlouisfed.org. 5.0 2.8 On the following graph, use the orange points (square symbol) to plot the nominal interest rates for the years 1997 to 2001. Next, use the green points (triangle symbol) to plot the real interest rates for those years. Nominal Interest Rate ?
Table: Price Levels 2011 221.3 2012 227.7 2013 232.2 2014 234.8 Reference: Ref 8(23)-9 Table: Price Levels (Table: Price Levels) Use Table: Price Levels. What is the rate of inflation from 2013 to 2014? A) 1.1% B) 2.6% C) 2.9% D) 2.0%
Q3: Suppose in UAE consists of 200 books and 290 Computers The table below shows data on prices for Books and Computers in UAE for three years. Assume that the base year is 2015. Year Price of Books Price of Computers 2014 $1.40 200 2015 $1.10 140 2016 $1.10 200 a. Given this data, what is the price of the basket in 2014? b. What is the price of the basket in 2015? C. What is the inflation rate between 2014 and 2015? d. Suppose that the nominal interest rate in UAE is 10.4%. In addition, the inflation rate is equal to 4.2%. Given this information, what is the real interest rate in UAE?
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.

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