6. Taylor just received a 3% pay increase but the current rate of inflation is 4%. We can say that Taylor’s real wage has Select one: a. remained the same b. fallen by 1% c. risen by 1%.
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6.
Taylor just received a 3% pay increase but the current rate of inflation is 4%. We can say that Taylor’s real wage has
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- The total price of purchasing a basket of goods in the United Kingdom over four years is: year 1=940, year 2=970, year 3=1000, and year 4=1070. Calculate two price indices, one using year 1 as the base year (set equal to 100) and the other using year 4 as the base year (set equal to 100). Then, calculate the inflation rate based on the first price index. If you had used the other price index, would you get a different inflation rate? If you are unsure, do the calculation and find out.The index number representing the price level changes from 110 to 115 in one year and then from 115 to 120 the next year. Since the index number increases by five each year, is five inflation rate each year? Is the inflation rate the same each year? Explain your answer.If, over time, wages and salaries on average rise at least as fast as inflation, why do people worry about how inflation affects incomes?
- Describe a situation, either a government policy situation, an economic problem, or a private sector situation, where using the CPI to convert from nominal to real would be more appropriate man using the GDP deflate: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.A fixed-rate mortgage has the same interest rate over the life of the loan, whether the mortgage is for 15 or 30 years. By contrast, an adjustable-rate mortgage changes with market interest rates over the life of the mortgage. If inflation falls unexpectedly by 3, what would likely happen to a homeowner with an adjustable-rate mortgage?
- What has been a typical range of inflation in the U.S. economy in the last decade or so?. The rate of inflation as of Thursday is 6 %, this is expected to continue. Sylvia wants to earn a real rate of return of 10% on her money. The bank is offering her 14% for deposits. a. should Sylvia accept this rate? Why or why not? b. If Sylvia expects this inflation rate to decrease to 3%, would your answer in "a" change?There is a persistent fear that there will be a high level of deflation. Many economists arn that it may be worse for the economy than if there is high inflation. Suppose that Herb is in debt and has to pay a 5.50% nominal interest rate. He expected inflatin to be 3.00%. Instead, inflation is -2.00% deflation. What is the real interest rate that Herb expected to pay? What is the real interest rate that Herb is actually paying? Because the economy is experiencing deflation of -2.00% nstead of inflation of 3.00%. Herb's real interest rate, compared t what he expected to pay, has A. decreased, so Herb feels poorer. B. decreased, so Herb feels richer. C. increased, so Herb feels richer. D. increased, so Herb feels poorer.
