Question

plz solve step by step

1. Consumer Price Index has changed by 7.67% and 7.78% in 2015 and 2016 for Turkey. Suppose a trade union has negotiated 15.5% increase in the wages at the beginning of 2015. Would it be enough to compensate the price increases? Show your calculations and explain your reasoning.

2. Consumer Price Index has changed by 7.78% in 2016 and 7.29% in the first 9 months in 2017. Suppose a trade union has negotiated 15.5% increase in the wages at the beginning of 2016. a. Calculate the percentage increase/decrease in the real wages in the end of 2016. Do the wages protect their purchasing power? (5 points) b. The Central Bank of Turkish Republic increased the inflation expectation for the end of 2017 to 9.8%. (economy news, 1 November 2017). In the light of this information, what is the mean inflation expectation of the Central Bank in the last two months of 2017. (5 points) c. Calculate the percentage increase/decrease in the real wages at the end of September 2017. (5 points) d. If this expectation of the Central Bank come true, what is the percentage increase/decrease in the real wages at the end of 2017? (5 points) e. After the Central Bank announcement, what percentage wage increase should be done to compensate the price increases at he end of year? (5 points) f. What is the October 2017 inflation rate? (Hint: It could not be calculated from the data above. It can be answered only from the economy news.) (no points)

Answer 1

Due to presence of HOMEWORKLIB POLICY, I am answering one question.

1.

Ans: Total % change in price level during two years:

$100((1+0.0767)(1+0.0778)-1)=16.0467$

% change in wages = 15.5 %

Since rise in wages is less than rise in price level, real wage will fall and this wage increase would not be enough to compensate price increase.

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