Say that the price of a representative basket of consumer goods and services in a hypo- thetical economy is as follows in each of four years: 2013: $70 2014: $74 2015: $80 2016: $83 (For this question please round your answers to two decimal places.) a) Create a price index for this basket with 2014 as the base year. What is the value of the index in each year? b) What is the inflation rate between each subsequent period (i.e. from 2013-14, 2014-15, and 2015-16)? c) If the real interest rate was negative during this whole time period, what must be true about the nominal interest rate (numerical answer, please)? Explain.
Say that the price of a representative basket of consumer goods and services in a hypo- thetical economy is as follows in each of four years: 2013: $70 2014: $74 2015: $80 2016: $83 (For this question please round your answers to two decimal places.) a) Create a price index for this basket with 2014 as the base year. What is the value of the index in each year? b) What is the inflation rate between each subsequent period (i.e. from 2013-14, 2014-15, and 2015-16)? c) If the real interest rate was negative during this whole time period, what must be true about the nominal interest rate (numerical answer, please)? Explain.
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter12: Money Growth And Intlation
Section: Chapter Questions
Problem 6PA
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Transcribed Image Text:2. Say that the price of a representative basket of consumer goods and services in a hypo-
thetical economy is as follows in each of four years:
2013: $70 2014: $74 2015: $80 2016: $83
(For this question please round your answers to two decimal places.)
a) Create a price index for this basket with 2014 as the base year. What is the value of
the index in each year?
b) What is the inflation rate between each subsequent period (i.e. from 2013-14, 2014-15,
and 2015-16)?
c) If the real interest rate was negative during this whole time period, what must be true
about the nominal interest rate (numerical answer, please)? Explain.
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