Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 22, Problem 2.6P
To determine
Real Interest rate.
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The CPI is 120 in year 1 and 150 in year 2. All inflation is anticipated. If Sonali Bank charges a nominal interest rate of 30 percent in year 2, what is the bank’s real interest rate?
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Chapter 22 Solutions
Principles of Economics (12th Edition)
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- Suppose, in the base year, a typical market basket purchased by an urban family costs $250. In Year 1, the same market basket cost $950. What is the consumer price index (CPI) for Year 1? If the same market basket costs $1,000 in Year 2, what is the CPI for Year 2? What was the Year 2 rate of inflation?arrow_forwardCPI increased from 200 to 220 between 2016 and 2017 , while the nominal interest rate was 5% in 2017. What was the inflation rate during the year? What was the real interest rate in 2017 based on Fisher Equation?arrow_forwardThe CPI fell from 110 at the start of the year to 125 at the end of the year. If the real interest rate is 7.9%, then what is the nominal interest rate?arrow_forward
- Calculate the nominal interest rate when real interest rate is 6% and inflation rate is 0%arrow_forwardAssume the CPI for a particular country in 2017 was 150 and in 2018 it rose to 160. Calculate the inflation rate between these two years.Alternatively, assume that instead of the CPI rising to 160 that it had fallen to 140 instead. Calculate the inflation rate between these twoyears. What is the meaning of the number that you got in the second case? Explain carefully.arrow_forwardThe cost of a gallon of gasoline was $0.57 in 1975. If the cost of gasoline grew with inflation what would the cost be in 2021? How does this compare this to the actual cost of gasoline in 2021? Explain your answer using a meaningful sentence. CPI in 1975 was 53.8 CPI in 2021 was 270.97arrow_forward
- For country A: CPI March 2021 is 523.5, and CPI April 2021 is 532.5. For country B: CPI March 2021 is 264.8, and CPI April 2021 is 266.8. We can say that The inflation rate in April was 1.7% in country A and 0.8% in country B. In April country A has a higher inflation rate than country B because the CPI increased by 9 points for country A and CPI increased by 2 points in country B. The overall price level in country A is approximately twice the overall price level in country B, because country A's CPI is almost two times the CPI of country B. In both March and April country A has a higher inflation rate than country B because for both months CPI is country A is higher than the CPI in country B.arrow_forwardOver a long period of time, the price of a box of chocolates rose from 1 EUR to 6 EUR. Over the same period, the CPI rose from 150 to 300. Adjusted for overall inflation, how much did the price of the box of chocolates change?arrow_forwardHere are values of the CPI (multiplied by 100) for each year from 1990 to 2000. For each year beginning with 1991, calculate the rate of inflation from the previous year. Instructions: Enter your responses rounded to one decimal place. Year CPI Inflation Rate (%) 1990 130.7 — 1991 136.2 1992 140.3 1993 144.5 1994 148.2 1995 152.4 1996 156.9 1997 160.5 1998 163.0 1999 166.6 2000 172.2arrow_forward
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