Indicate whether the items below (A) increase inflation, (B) decrease inflation, or (C) does not directly affect economic growth or cannot be determined. 1. Subsidy on inputs 2. Increase in wages
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Indicate whether the items below (A) increase inflation, (B) decrease inflation, or (C) does not directly affect
1. Subsidy on inputs
2. Increase in wages
3. Promotion of green alternatives
4. Higher business tax
5. Higher interest rates on treasury bonds
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- Suppose I lend my friend Peter $100 for one year, and he agrees to repay me with interest. We each have an expectation that the inflation rate over the coming year will be 5 percent, and so we agree that he will pay me back at a nominal rate of 7 percent interest. a) What real rate of return do I expect to receive? b) What happens if inflation turns out to be 8 percent over the year? Who is made better off and who is made worse off? c) What happens if inflation turns out to be 3 percent over the year? Who is made better off and who is made worse off?What relationship (positive, negative, none) do you observe between (i) economic growth and unemployment, (ii) economic growth and inflation, (iii) unemployment and inflation over the period?Examine the graph for your Barbados from 2009 to 2018. What relationship (positive, negative, none) do you observe between (i) economic growth andunemployment, (ii) economic growth and inflation, (iii) unemployment andinflation over the period? Justify your response.
- Jay and Joyce meet George, the banker, to work out the details of a mortgage. They all expect that inflation will be 2 percent over the term of the loan, and they agree on a nominal interest rate of 6 percent. As it turns out, the inflation rate is 5 percent over the term of the loan. a. What was the expected real interest rate? b. What was the actual real interest rate?Continue using the same environment for this question: Sheila lives for two periods. She earns $100 in the first period and $110 in the second period. She wants to consume exactly the same amount in both periods. The interest rate at which she can save and borrow is 10%. There is no inflation. Which of the following statements is true? A. Sheila’s lifetime consumption is greater than her lifetime income B. Sheila’s lifetime consumption is lower than her lifetime income C. Sheila’s lifetime consumption is equal to her lifetime income Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.Suppose that a borrower and a lender agree on the nominal interest rateto be paid on a loan. Then inflation turns out to be higher than they bothexpected.a. Is the real Interest rate on this loan higher or lower than expected?b. Does the lender gain or lose from this unexpectedly high inflation?Does the borrower gain or lose?c. Inflation during the 1970s was much higher than most people hadexpected when the decade began. How did this affect homeowners whoobtained fixed-rate mortgages during the 1960s? How did it affect thebanks that lent the money?To find additional study resources, visit cengagebrain.com, and searchfor "Mankiw."
- 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 partsIf my nominal wages go up 5% this year and inflation is 2% this year, what happened? a) All of the choices are correct. b) I experience an increase in my both my nominal income and in my real income. c) My nominal wages increased more than the increase in the overall price level. d) My real wages increased by approximately 3%If the nominal interest rate is 9 percent and the real interest rate is 3 percent, then the inflation rate is Question 19 options: a 12 percent. b 3 percent. c -6 percent. d 6 percent.
- describe in details ,a situation,either a government policy situation ,an economic problem,or a private sector situation where using ,i)cpi ,ii)Gdp deflator ,to convert from nominal to real values would be more appropriate than using the other .If overtime,wages and salaries on average rise rise at least as fast as inflation ,why then do people still worry about the effects of inflation on income?If the CPI was 110 last year and is 121 this year, what is this year’s rate of inflation? What is the “rule of 70”? How long would it take for the price level to double if inflation persisted at (a) 2, (b) 5, and (c) 10 percent per year?Which of the following statements is TRUE? A. When petroleum prices increase due to war in Ukraine this will cause demand-pull inflation B. If Jane gets a wage increase of 4% but inflation is 5%, her real income decreases C. None of the above D. John is a banker on a fixed income, this means he will not be affected by high inflation rates