Question

What is the answer to part C?

Note: The answer is not 0.6

Answer the questions based on the relationship between real and nominal variables. Round answers to two decimal places as needed. When Joe started his job at the laundromat five years ago, his wage was $4.50 an hour. Today, his wage is $8.00 an hour. If Joe started his job in the base year, and his real wage is the same as when he started, what is the Consumer Price Index (CPI) today? Round your answer to two decimals. current CPI: 177.77 The International Disc Jockey's Union has a wage contract that stipulates a yearly wage increase based on the Consumer Price Index. If this year's wage is $28.00, the current CPI is 170, and the contract was first signed in the base year, what was the original salary the first year of the contract? Round your answer to two decimals. original salary: $ 16.47 Shelby bought her dream car, a 1966 red convertible Mustang, with a loan from her credit union. If Shelby paid 4.9% and the bank earned a real rate of return of 4.3%, what was the inflation rate over the life of the loan? inflation rate: 0.60 Tim is feeling magnanimous and decides to loan his mother enough for her to pay off her credit card bills. If Tim wants to earn 3.5% and expects inflation to be 4.9%, how much will he charge his mother for the loan? nominal rate: 8.40

Answer 1

c.

Inflation rate = Nominal return - Real return

= 4.9-4.3= 0.6% ~ 1%

1% is the correct answer...