(16) Peter deposits $1,200 in a savings account that pays an annual interest rate of 5 percent. Over the A= P(ltr)t course of a year, the inflation rate is -1 percent. At the end of the year, Peter has A) $48 more in his account, and his purchasing power has decreased by $12. B) $60 more in his account, and his purchasing power has increased by $48. C) $72 more in his account, and his purchasing power has increased by $48. morn in his account, and his purchasing power has increased by $72.

(16) Peter deposits $1,200 in a savings account that pays an annual interest rate of 5 percent. Over the A= P(ltr)t course of a year, the inflation rate is -1 percent. At the end of the year, Peter has A) $48 more in his account, and his purchasing power has decreased by $12. B) $60 more in his account, and his purchasing power has increased by $48. C) $72 more in his account, and his purchasing power has increased by $48. morn in his account, and his purchasing power has increased by $72.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 37P: Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time...

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Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time payment of 20,000. However, if the inflation rate is 6 per year, how much buying power will that 20,000 have when measured in todays dollars? Hint: Start by calculating the rise in the price level over the 16 years.
Year | price of meat (per Kg) price of bread (per Kg) price of gas (per lt) housing price (monthly rent of 1 bd unit) $10 $20 S1.5 S1000 $12 S18 S1.5 $1200 Suppose a consumer basket consists of 40 Kg meat, 50 Kg bread, 400 It gas, and a one bedroom apartment for one year. Using the table above, compute the inflation rate in this economy based on CPI between years 1 and 2. 10% 12% 6% 17%
Henrique is a baseball fan and attends several games per season. His expenses per season are listed in the table below: |Year 1 |Year 2 5 Baseball Tickets Jersey Food Transport $500 $600 |$100 $150 $50 |$120 $150 $80 Calculate the inflation rate for Henrique's baseball season between year 1 and 2. 18.5% O0.18% 15.8% O1.6%
The following table lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. Month April May June Price of Gas (Dollars per gallon) 2.00 60.1% Refer to Table 25-3. What is the inflation rate for May? 67.2% -4.1% 10% 3.50 3.85 Price of Milk (Dollars per gallon) 3.50 3.52 3.58
Interest RatesSuppose that you make a loan of $1,500 to your friend at a rate of 10% interest because you expect the inflation rate to be 5%.a) By how much does your purchasing power increase once the loan is completely paid off?b) Assuming that after the loan was repaid, you discovered that inflation rate over the life of the loan was only 2%. Who gained?
Assume a constant inflation rate of 5% annually and 0% interest rate. Over a whole period of 14 years. A real estate investment after 4 years would consume 307,500$. Lasting to 10 years the income is a constant of 170,000$ each year. A) What would be the equivalence selling price for the real estate in year 0?
The CPI-U (U.S. city average, all items) has the following annual averages: a. For each year from 2014 to 2017 determine the annual inflation rate inpercent to two decimal places. b. Because inflation, like interest, is compounded from period to period (e.g., year to year), estimate the overall annual inflation rate per year from 2013 to 2017. Suggestion! Do not simply average the rates of part (a).
Forty years ago, a gallon of gas cost $1.20. Today, a gallon of gas costs 2.60. Suppose that the gas price increase has been entirely due to inflation. a. Calculate the annual inflation rate. b. Today, you plan to make a cash purchase for a new car. The Model K costs $24,000 and you estimate the car will last 10 years and require 600 gallons per year. The Model M costs $28,000 but gets better mileage, so it will only require 400 gallons per year. The cars are identical in all other respects, and they will both be worthless after 10 years. Assume that gas prices will rise by the rate of inflation (that you calculated in part a. Further assume that all gas expenditures are incurred at the end of the year. If the nominal interest rate is 9% per year, which car should you purchase? Show all calculations and explain carefully.
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3. An economist has predicted that for the next 5 years, the U.S. will have a 2.5% annual inflation rate, followed by 5 years at a 3.5% inflation rate. This is equivalent to what average price change per year for the entire 10-year period?
Use the information below to: a) compute the price index for each year using 2019 as the base year. b) compute the inflation rate between the two years. Item Quantity Unit Price-2018 Unit Price-2019 Coffee 20 pounds $7.00 $8.00 Rent 12 months 950.00 1,000.00 Pizza 100 pizzas 12.00 14.00 Cable 12 months 55.00 60.00 Vacation 2 weeks 550.00 600.00
You and your spouse just adopted twin girls, little Heather and Beth. You want to make sure they are taken care of for the next 22 years. (A)Based on the following information, how much life insurance needs to be purchased for the husband using the income approach, if any? (B) How much, if any, needs to be purchased for the wife using the income approach? Assume 3% inflation rate. Market Labor Value Household Production Value Husband $72,000 $15,000 Wife $15,000 $40,000