38. Suppose a nation's inflation rate is 6.8% from Year 1 to Year 2. If the...
Suppose the inflation rate in Canada is 2% and is expected to remain 2% for the upcoming year. Bank deposits pay 3% annual interest rate in Canada. Suppose you deposit $100 at a bank. a. In nominal terms, your savings will grow to _$ next year. b. Due to inflation, the real value of your savings account next year is c. What is the real rate of return on your savings? A firm is considering buying a machine that will...
Suppose that the Consumer Price Index (CPI), a widely used measure of inflation in the U.S., rose from 100 in one year to 120 during the next year. The rate of inflation between the two (2) years is A. 120%. B. 220%. C. 20%. D. Cannot be determined without further information.
The following graph shows the inflation rate in the US between
1965 and 2015.
(a) From 1965 to 1995, does CPI in the US always increase over
time? Explain.
(b) Suppose 2009 is the base year, and the inflation rate
between 2009 and 2010 is -2%. (i) What is the CPI in 2009? (ii)
Calculate the CPI in 2010. (iii) Between 2009 and 2010, the nominal
interest rate is 3%, calculate the real interest rate.
(c) Between 1970 and 1985,...
The following graph shows the inflation rate in the US between 1965 and 2015. Inflation 16% rate 14 (percent) 12 10 8 6 4 rumah un 2 0 1975 1985 1995 2005 -21965 2015 -4 (a) From 1965 to 1995, does CPI in the US always increase over time? Explain. (b) Suppose 2009 is the base year, and the inflation rate between 2009 and 2010 is -2%. (i) What is the CPI in 2009? (ii) Calculate the CPI in 2010....
Suppose you know the value of the consumer price index in year 1 as well as the inflation rate in year 2. Which of the following equations is valid for the CPI in year 2? CPI in year 2= (Inflation rate in year 2/CPI in year 1) +CPI in year 1)/100.
Suppose Russia's inflation rate is 100% over one year but the inflation rate in switzerland is only 2%. According to the relative purchasing power parity, what should happen over the year to the Swiss franc's exchange rate against the Russian ruble?
Suppose the money market annual yield (interest rate) is 1.50%. In the meantime, the one-year inflation rate based on Consumer Price Index (CPI) was 2.0%. If the expected inflation rate remains the same for the next year, what is the expected real interest rate for the money market investment?
The following graph shows the inflation rate in the US between
1965 and 2015
.
From 1965 to 1995, does CPI in the US always increase over
time? Explain.
Suppose 2009 is the base year, and the inflation rate between
2009 and 2010 is -2%.
What is the CPI in 2009?
Calculate the CPI in 2010.
Between 2009 and 2010, the nominal interest rate is 3%,
calculate the real interest rate.
Inflation 16% rate 14 (percent) 12 10 8 6...
Year -
Suppose the following data describe a nation's population Year 1 Year 2 Population Labor force Unemployment rate 300 million 140 million 6 percent 310 million 150 million 6 percent (a) How many people are unemployed in each year? (b) How many people are employed in each year? (c) Compute the employment rate(i.e, Number employed Population) in each year Year 1: Year 2: Year : Year 2: Year l: Year 2: Based on the data in the previous problem,...
Suppose that on January 1, the Yen price of the dollar is 95 (C$1= ¥100). Over the year, the Japanese inflation rate is 5%, and the Canadian inflation rate is 7%. At the end of the year, the exchange rate is C$1 = ¥98. (a) Based on this information is Yen undervalued or overvalued according to PPP? Explain.What happened to the real exchange rate? Explain.