Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card
8th Edition
ISBN: 9781337607735
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 24, Problem 6CQQ
To determine
Calculation of nominal and real interest rate.
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You deposited $2,000 in a savings account,and an year after you have $2,100.Meanwhile the CPI rises from 200 to 204.In this case ,the nominal interest rate is ________percent,and the real rate interest is________percent.
a.1,5
b.3,5
c.5,1
d.5,3
Consider the following basket of student essentials:
2019 2020
Burritos $6.30 $6.60
Pizzas $9.90 $10.00
Movie Tickets $10.00 $10.50
Energy Drinks $4.99 $5.99
a. Using 2019 as the base year, what is the CPI in 2019?
b. Assume students buy 30 burritos, 25 pizzas, 15 movie tickets, and 200 energy drinks each year. What is the CPI in 2020 using 2019 as a base year? What is the inflation rate? Would this rate be higher or lower if students bought more energy drinks?
A low price level induces consumers
to save, which drives down the interest
rate.
9. In 1970, Mr. Sami earned $12,000; in
1980, he earned $24,000; and in 1990,
he earned $36,000. If the CPI was 40 in
1970, 60 in 1980, and 100 in 1990, then
in real terms, Mr. Sami's 's salary was
highest in *
O 1980 and lowest in 1990.
1990 and lowest in 1980.
1980 and lowest in 1970.
1990 and lowest in 1970.
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Chapter 24 Solutions
Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card
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- On January 1, 2012, Albert invested $10,000 at 6 percent interest per year for three years. The CPI (times 100) on January 1, 2012, stood at 100. On January 1, 2013, the CPI was 105 on January 1, 2014, it was 110; and on January 1, 2015, the day Albert's investment matured, the CPI was 118. Find the real rate of interest earned by Albert in each of the three years and his total real return over the three-year period. Assume that interest earnings are reinvested each year and themselves earn interest. (Hint Calculate inflation and real interest for each year and then calculate it for the three years as a whole.) Instructions: Enter your responses rounded to one decimal place. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Year 2012 2013 2014 Real rate of interest 1.0 1.0 Total real rate of return; 8 %.arrow_forwardam. 279.arrow_forwardSuppose the CPI is 120 in year 1 and 150 in year 2. If First National Bank charges a nominal interest rate of 30 percent in year 2, what is the bank's real interest rate? Explain.arrow_forward
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