Assume that in 1974, interest rates were 7.443% and the rate of inflation was 12.065%. What was the real interest rate in 1974? How would the purchasing power of your savings have changed over the year? The real rate of interest in 1974 was %, which means that the purchasing power of your savings would have by %. (Round to three decimal places.) decreased increased

Q: What is the real interest rate if the nominal interest rate is 7.73% and the expected inflation rate…

A: The real interest rate is the inflation-adjusted interest rate. It shows the real cost of funds from…

Q: If Dave loans funds at 2 percent while the inflation rate is 4 percent, his real rate of interest is…

A: Nominal Interest Rate(i) is the percentage(%) increase in money that borrower pays without taking…

Q: Suppose that Lisa lends Alex $1,000, which Alex must repay after one year with an interest payment…

A: The term ‘inflation’ implies constant upward rise in the average prices of services and commodities…

Q: Suppose that the nominal interest rate is equal to 4.2% and the inflation rate over the same period…

A: Real interest is the interest rate adjusted after inflation. It adjusts the observed market interest…

Q: Assume that the price of a market basket of goods and services is $2,000 in the base period, $2,060…

A: The price of a market basket of goods and services is $2,000 in the base period, $2,060 one year…

Q: Suppose that the total expenditures for a typical household in 2015 equaled $2,500 per month, while…

A: Cost of basket of goods in 2015 = 2500 $ Cost of basket of goods in 2017 = 3000 $1 CPI in 2017 =…

Q: Knowing that the average annual accumulated inflation in 2018 was 3.75%, calculate how much the…

A: Inflation is an economic concept that is defined as a rise in the general price level of goods and…

Q: You are given a loan with a nominal interest rate of 5%. You must pay back this loan one year from…

A: The nominal interest rate the interest rate that you earn or pay on money that you lend or borrow;…

Q: Over the last 10 years, the average rate of inflation has been 1.61%. what is the purchasing power…

A: Inflation is the increase in prices of goods and services over a given period of time. Purchasing…

Q: Year Price of Food Quantity of Food Price of Clothing | Quantity of Clothing 2009 (base year) $2…

A: The consumer price index (CPI) is the measure of change in the price in the consumer goods and…

Q: The relationship between nominal and real interest rates continues to hold when there is deflation…

A: In an economy, the difference between actual and expect interest rate will lead to affect the…

Q: The CPI (using a 2000 base year) for 1965 is 26.0. Suppose a household's annual take-home pay in…

A: Given that,   CPI for 1965 = 26.0 Annual take home pay = $8,320 Assume that, in base year CPI is…

Q: The total price of purchasing a basket of goods in the United Kingdom over four years is: year…

A: Inflation is the rate at which prices rise over a given time period. Inflation is typically defined…

Q: rate of​ inflation

A: The inflation calculates the increment in price level. There are different types of inflation:…

Q: Calculate a price index for every year, with year 4 as the base year, so in the blanks, you will…

A: Price index in year N = Price in year N x (Price in year 4 / 100)

Q: The CPI increased from 114 to 120 between two years. Average annual household income increased from…

A: Here, it is given that CPI changes from 114 to 120 and nominal income changes from $30,000 to…

Q: If the nominal interest rate on an asset is 10% and inflation is also 8%, what is the real interest…

A: The nominal interest rate is the percentage increase in money you pay the lender for the use of the…

Q: Suppose the annual nominal interest rate on bank certificate of deposit is 12%. How much is the real…

A: The expression that shows the relationship between the nominal interest rate, real interest rate,…

Q: Assume that the market basket contains 10X, 20Y, and 45Z.The current-year prices for goods X, Y, and…

A: The value of CPI overtime is generally used to measure the inflation rate over time. In the field of…

Q: Income in year 1: $50,000 Income in year 2: $60,000 CPI in year 1 = 100 CPI in year 2 = 110 what…

A: Real income is income of individuals or nations after adjusting for inflation. It is calculated by…

Q: Consider a simple economy that produces only three products: hot dogs, torches and golf balls. Use…

A: since you have asked multiple questions and according to our policy we can only solve the first part…

Q: If banks expect that the rate of inflation in the coming year will be 4.95% and they want a real…

A: The real interest rate is the adjusted interest rate that doesn’t include the effect of inflation…

Q: Assume you just deposited $1,000 into a bank account. The current real interest rate is 3% and…

A: A real interest rate is adjusted to remove the effects of inflation while a nominal interest rate…

Q: If the inflation rate 23% and real rate is 12%, what is the nominal interest rate? A. 37.76% B.…

A: Business have been of many types through ages. For example in agriculture, there is food business,…

Q: Suppose we shopped for a basket of goods in Year 1 and it cost $500. Suppose the same basket of…

A: Given information: Cost at year 1 = $500 Cost at year 2 = $685 Year 1 is the base year The formula…

Q: Suppose, in the base year, a typical market basket purchased by an urban family cost $250. In Year…

A: In economics and finance, an index is a statistical measure of change in a representative group of…

Q: Suppose a person works hard at a job after graduation and after her first year, her effort is…

A: A consumer like the person in the question is never bothered about the money in numerical terms…

Q: Calculate what will be the nominal interest rate at any given loan if the inflation is 3.2% and the…

A: The information being given is:- Inflation rate = 3.2% Real interest rate = 0.8% We have to…

Q: Suppose the market basket consists of 100X, 200Y, and 300Z. Current-year price each unit of X, $2…

A: CPI is measured using fixed basket of goods.

Q: If the Consumer Price Index was 107 in one year and 104 in the following year, then the rate of…

A: Inflation is the abnormal increase in the price level of the goods and services of the economy over…

Q: The CPI in period 1 is 150 and the CPI in period 2 is 200. What is the rate of inflation between…

A: Consumer price index (CPI) measures the price change of a particular bundle of goods from different…

Q: Suppose the nominal median household income for a family of four in the United States was $24,118.00…

A: Real Income = CPI in base year / CPI in current year * 100

Q: If the nominal interest rate is 10 percent and the real interest rate is 5 percent, the inflation…

A: Inflation rate: It is the rate of increase in the prices in a particular time period.

Q: Suppose Eileen is an avid reader and buys only comic books. Eileen deposits $4,000 in a bank account…

A: The purchasing power(pp) of $4000 deposited in the account of individual E is calculated below when…

Q: If the Consumers Price Index in March 2016 was 1,125 and it was 1,154 in March 2017, this indicates…

A: Inflation rate is calculated by the percentage change in CPI.

Q: Suppose Ginny is an avid reader and buys only comic books. Ginny deposits $3,000 in a bank account…

A: Hi! Thank you for the question, As per the honor code, we are allowed to answer three sub-parts at a…

Q: The value of a price index in the base year is   0 100 200 The inflation rate The average cost of…

A: the price index refers to a normalized average of price relatives for a given class of products or…

Q: The following table shows the average nominal interest rates on six-month Treasury bills (indicating…

A: Answer .) The real interest rate is the rate that an individual receives on his investment, adjusted…

Q: For a given real interest rate, a decrease in the inflation rate would   a. increase the…

A: We know,Real interest rate = Nominal interest rate – inflation rateTherefore, a decrease in…

Q: What would $30,000 earned in 1995 be equal to in 2011? The CPis for the two years are 152.4 and…

A: Consumer Price Index (CPI) measures the average change in the price levels for a basket of…

Q: Suppose that over the past year, the real interest rate was 4 percent and the inflation rate was -1…

A: Inflation is the rate at which the value of a currency is falling and, consequently, the general…

Q: The Nominal Interest rate and inflation rate in an economy is same.  What will be the real interest…

A: The interest rate which is irrespective of inflation is known as nominal interest rate. And the…

Q: Assuming the nominal interest rate is positive, ceteris paribus, which of the following statements…

A: We know: Real Interest Rate = Nominal Interest Rate - Inflation This means how much are we earning…

Q: Suppose the value of a price index is 50 in 2015 and 60 in 2016. What is the rate of inflation from…

A: The rate of inflation can be calculated by dividing the difference between current inflation and…