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If VIF- variance inflation factor is 1.25 what does it suggest when price is a function of income
Is multicollinearity an issue here?
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- 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.Why does the quality/new goods bias arise if we calculate the inflation rate based on a fixed basket of goods?If the annual inflation rate is 10% and the annual real interest rate is 20%, what is the annualnominal interest rate?(a) Less than 0%(b) Between 5-15%(c) 30%(d) More than 30%(e) None of the above
- 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?If inflation is 4 percent per year and you receive a 3 percent raise in income, then your:If the Consumer Price Index rises from 125 in a year to 130 in the following year, the rate of inflation in that year is: Group of answer choices a) 4% B) 1.04% C) 3.85% D) 5%
- (1-3) Spartanville is a small country off the coast of Western Canada that relies heavily on the extraction of artisia, a cheap metal that is an input to production for many Spartanville products. This year, Spartanville has seen extended blizzard conditions followed by heavy flooding when the snow melted; making artisia nearly impossible to mine. +Assume that the initial level of spending growth is 8%. +Also assume that prior to the blizzards, Spartanville was at an equilibrium inflation rate of 4%. 1. What is the long run economic growth rate before the blizzards occurred? 2. In the New Keynesian model, what is the general effect on inflation, short run, and long run economic growth in this problem? Draw a (legible) diagram to show what happens if the Fed does not respond to the shock. 3. Assume the long run rate of growth fell to -1%. What is the new inflation rate if there is no change in velocity and no action by the Fed?Over the last 10 years, the average rate of inflation has been 1.51%. What is thepurchasing power of a dollar today in terms of what a dollar could purchase in 2012?Jeff just received a refund of $2,178 from his family physician. This was anoverpayment on his account, and it has been three years since the overpayment was due. Jeff is really frosted by this delay! What is the purchasing power now (year 0) of the overpayment if inflation has been 4%, 3%, and 2%, respectively, in years −3 (three years ago), −2 (two years ago), and −1 (last year)?
- Samantha receives a starting salary offer of $60,000 for Year 1. If inflation is 3% each year, what must her salary be to have the same purchasing power in Year 10? Year 20? Year 30? Year 40?If you are looking for a 4% real return (inflation-free interest) on your investment, would you be interested in an investment opportunity that produce a 9% return on investment (market interest rate) if the inflation rate is 5%?Michelle has won a prize that will pay her $1000 per year, starting one year from today,for 15 years. Inflation is expected to be 3% per year for the next 15 years, and her interest rate is 5% per year. What is the present value of this prize today? (Treat the 3% inflation as a negative 8, thus g = -3%, and i is 5%)
