How long would it take for the price level to double if inflation persisted at the following percentages? (Instructions: Round your answers to one decimal place.) a. 8.75 percent per year: ( b. 1.25 percent per year: [ c. 1.75 percent per year: years years years
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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.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.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.
- Inflation is a general increase in prices and may be measured by the Consumer Price Index (CPI). Use Appendix A to answer the questions. In Year 1 the CPI was 100; 20 years later, it was 229. What was the annual rate of inflation? Round your answer to the nearest whole number. ___________% Nancy and Pam both currently earn $90,000. If the annual rate of inflation is 3 percent, how much must each earn after twelve years to maintain their purchasing power? Round your answer to the nearest dollar.$ ___________ Your parents bought a home for $40,000 in Year 1 and sold it in Year 21 for $220,000. What was the annual rate of price increase over the 20 years? Round your answer to the nearest whole number._____________ %2. The price of natural gas has been zooming up from $4 per MMBtu on December 31, 2021 to $8 on April 30, 2022. What was the average effective rate of inflation per day over those 120 days? Hint: Your answer when compounded by 120 days should double the price. The nearest answer is: a. 0.5% b. 0.6% c. 0.7% d. 0.8% e. 0.9%Suppose you borrow $1,000 of principal that must be repaid t the end of two years, along with interest of 5 percent a year. If the annual inflation rate turns out to be 10 percent, Hint: Future value = Present value x (1 + Growth in prices), where t is the number of years evaluated. Real value of loan repayment Amount of loan x (1 + Real interest rate) Instructions: Round your responses to the nearest whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. a. What is the real rate of interest on the loan? % b. What is the real value of the principal repayment? c. Who loses, the debtor or the creditor? Debtor O Creditor
- 7. Using you answer for Question 2, what will be the price per MMBtu of natural gas on June 30,2022 if this average inflation rate continues for the next 60 days (a total of 180 days from December 31,2021)? The nearest answer is:a. $8 b. $9 c. $10 d. $11 e. $12 Answer for 2 was 0.5%a1. You learn on the business channel that inflation was about 0.8% last month. Assume this rate is maintained each month for a year. What will the annualized rate be? EXAMPLE: A rate of 0.1% per month represents (1 + 0.001)^12 -1 = 0.0121 or 1.21% annually. a2. Your sales grew 4% last year. EXAMPLE: A 2% growth rate for the year would require 1.02 = (1 + r)^12. Solve this for r: See image ; r = .00165 or .165% per month on average. What average monthly growth rate is needed to give the 4% growth?You currently have $300 in the bank which pays a 5% pa interest rate. Apples currently cost $1 each at the shop and the inflation rate is 4% pa which is the expected growth rate in the apple price. All rates are given as effective annual rates. Which of the below statements is NOT correct? All answer options are rounded to 6 decimal places. Question 1 Select one: a. In 3 years the nominal apple price will be $1.029124. b. The real growth rate in the apple price is expected to be 0% pa. c. In 3 years your money in the bank will be worth $347.287501 in nominal terms. d. In 3 years your money in the bank will be worth 308.737324 apples. e. The real bank interest rate is 0.961539% pa. Provide accurate answer as soon as possible.
- What is the inflation rate in 2019? Has it increased or decreased since 2018 and by how much? If the nominal interest rate in 2019 is 7%, what would be the change in purchasing power of $1,000 deposited in January 219 by the end of the year? Please explain if it has increase or decreased since 2018 and by how much? also what if inflation rate was higher then purchasing power?Alfredo wants to know how much he must put in a bank account today to achieve an amount equal to $20,000 in today's value (year 0) in 14 years. Inflation is 8%. The interest rate offered by the bank is 5% per year. a) Calculate the conversion to current dollars of the $20,000 $__________ . b) How much should you deposit today in the bank to achieve your goal? $________Inflation Rate (percent at annual rate) 25%- 20% 15% 10% 5% 0%b -5% Japan 0 (b) Average Inflation and Nominal Interest Rates in Various Countries (1999-2012) O Russia O Turkey O Argentina O Indonesia O O O O Brazil 5 10 15 Nominal Interest Rate (percent at annual rate) Which of the following can be said about the figure above? Check all that apply. 20 elect one or more: The figure provides support for the Fisher effect, by displaying a positive relationship between the inflation rate and the nominal interest rate. The figure provides support for the Fisher effect, by displaying a negative relationship between the inflation rate and the nominal interest rate. According to the figure, the real interest rate is relatively high in Brazil. The figure provides support for the Fisher effect, by showing how developed economies like the U.S. and Japan has lower inflation rates than economies like Turkey and Indonesia. According to the figure, the real interest is relatively low in Turkey.
