11. In the long run, a one-time increase in the money supply leads to: A decrease in the velocity of money An increase in the price level d. An increase in real GDP e. no effect on output and prices An increase in the velocity of money a. b. C.
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- Problem Set 1: Real and Nominal GDP Below are some data from the land of milk and honey. Year Price of Milk (€) Quantity of Milk (in litres) Price of Honey (€) Quantity of Honey (in jars) 2017 2 100 4 50 2018 2 200 4 100 2019 3 200 6 100 Compute nominal GDP, real GDP and the GDP deflator for each year, using 2017 as the base Compute the percentage change in nominal GDP, real GDP and both GDP deflator and inflation in 2018 and 2019 from the preceding year. For each year, identify the variable that does not change. Explain in words why your answer makes Did economic well-being rise more in 2018 or 2019?If you deposit money in the bank for one year scenario 1: nominal interest rate = 10%, inflation rate = 0%  Scenario 2: normal interest rate = 25%, inflation rate = 15% In which scenario does the real value of the deposit grow the most? Explain.Question 18 You borrow money for a new car at a rate of 5%; inflation is at 4%. From this information, we know that the nominal interest rate is 4% the real interest rate is 4% the nominal interest rate is -1% the real interest rate is -1% the real interest rate is 1% Question 19 In financial markets, firms and governments in search of funds to pay for their daily operations would be the savers of these funds. both the buyers and sellers of these funds. lenders of these funds. buyers of these funds. sellers of these funds. Question 20 The face value of a bond is the value of the bond at maturity plus the price of the bond at purchase. value of the bond at maturity minus the price of the bond at purchase. price of the bond at purchase. value of…
- 1. Paul and Mary wanted to get married, and they wished to purchase a house for the new family. Therefore, they had arranged a meeting with a banker to know more about the mortgage details. They all expected that inflation will be 3 percent over the borrowing period, and the banker offered them a nominal interest rate of 6 percent. As it turns out, the inflation was 5 percent over the term of the loan. a. What was the expected real interest rate? b. What was the actual real interest rate? c. Who benefited and who lost because of the unexpected inflation?Assume that in Azerbaijan, Alyana deposits $5,000 in the bank for a single year. Given the following cases, answer the questions. CASE 1: inflation = 0%, nominal interest rate = 5% CASE 2: inflation = 5%, nominal interest rate = 10% CASE 3: inflation = 10 %, nominal interest rate = 15% In which case does the real value of your deposit grow the most? Assume the tax rate is 30%. In which case do you pay the most taxes? Compute the after-tax nominal interest rate,then subtract inflation to get the after-tax real interest rate for both cases. Answer all partsPart 1) Can you Explain how an economy’s income must always equal its expenditure with simple example Part 2) Can you please write the problems with the Consumer Price Index. Part 3) What is fiat money? What is commodity money? Which kind do we use? Part 4) Suppose you given a choice to live in a country with high level GDP and low growth rate or to live in a low level of GDP and a high growth rate, which option would you choicee and why?
- Q1: The consumer price index (CPI) is a fixed-weight index. It compares the price of a fixed bundle of goods in one year with the price of the same bundle of goods in some base year. Calculate the price index of a bundle containing 100 units of good X, 150 units of good Y, and 25 units of good Z in 2018, 2019, and 2020. Calculate the percentage change in index between 2018 and 2019 and again between 2019 and 2020. What is rate of inflation/deflation between 2019 and 2020? GOOD QUANTITY CONSUMED 2018 PRICES 2019 PRICES 2020 PRICES X 100 Rs. 10.00 Rs.10.50 Rs. 10.75 Y 150 Rs. 10.50 Rs. 20.00 Rs. 20.00 Z 25 Rs. 30.00 Rs. 30.25 Rs. 30.00An economy produces two goods, x, and y. A year ago the price of x was $4 and the price of y was $6. Today the price of x is $8 and the price of y is $10. What happened to the nominal and the real value of good x? What happened to the nominal and real value of good y?4. Calculate the growth rate of real GDP in 1998. 5. Calculate the growth rate of nominal GDP in 1998. 6. Calculate the CPI for 1997. 7. Calculate the inflation rate for both 1997 and 1998.
- MCQS 1- Which of the following is NOT a component of Gross Domestic product? Investment. Consumption. Tax Government Expenditure 2- ………… is the market value of all final goods & services produced within a country in a given period of time. Inflation Multiplier Gross Domestic Product Gross National Product 3- ………………... refers to the measure of the overall cost of the goods and services bought by a typical consumer. Producer price index Nominal interest rate Consumer price index Inflations please answer all mcqsSuppose the following table records the total output and prices of rice and gasoline for an entire economy. This economy produces rice and gasoline only. Further suppose the base year is 2015. Rice Gasoline Year Price Quantity Price Quantity 2015 $8.00 500 $2.00 2000 2016 $9.00 600 $2.30 2000 2017 $10.00 600 $3.00 1800 (1) Compute nominal GDP for 2015, 2016, and 2017. (2) Compute real GDP for 2015, 2016, and 2017. (3) Compute GDP deflator for 2015, 2016, and 2017. (4) Calculate inflation rate from 2016 to 2017 using GDP deflator you calculated above. Write your calculation below:Suppose that over the last three years, there has been a 10% increase in real GDP, but a 5% increase in nominal GDP, we might conclude thata) The economy has entered a recession.b) The price level has increased, with 5% inflation.c) The price level has decreased, with 5% deflation.d) The economy has experienced a combination of low growth and inflation.