Answered: Suppose a person's nominal income…

Suppose a person's nominal income increases by 8% while the price level in the economy increases by 10%. In this case, the person's real income: O increased by 18%

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter6: Macroeconomic Measurements, Part I: Prices And Unemployment

Section: Chapter Questions

Problem 2QP

See similar textbooks

Related questions

Q: Suppose a person's nominal income increases by 8% while the price level in the economy increases by…

A: Nominal income is the value of final goods and services produced in the country and real income…

Q: The consumer price index for Planet Econ consists of only two items: books and sandwiches. In 2000,…

A: The consumer price index measures change in the price level of basket of goods and services in a…

Q: Suppose the value of corn a household produces is the equivalent of 60 percent of its income and the…

A: The total amount sold is the total sales of the company subject to its return, benefits, and…

Q: Bob's Barber Shop cut 3,000 heads of hair in the year 2000 and 3,100 in the year 2001. The price of…

A: Real GDP refers to GDP in which prices are fixed to a base year. The measure is used to make…

Q: If nomiņal GDP is 10trillion and real GDP is 12trillion then the GDP deflator is: O 120, indicating…

A: GDP is the value of final goods and services produced in an economy over a period of time. Nominal…

Q: $620 Personal Consumption Expenditures Saving 50 200 Government Purchases 750 Net Domestic Product…

A: Given information:-

Q: An economy is comprised of only two goods. Using 2019 and the base year, what is the rate of…

A: Inflation rate=(price of 2020×quantity of 2019)-(price of 2019×quantity of 2019)(price of…

Q: Suppose nominal GDP increased in a given year. Based on this information, we know with certainty…

A: Nominal GDP means GDP produced for the current goods and services produced without the adjustment of…

Q: Nominal Real Year Ox Px $5 S6 $7 $8 $9 Oy Py $1 $2 Qz 20 25 Pz $10 $15 $12 $12 $14 GDP GDP 1 10 35…

A: When the value of goods and services is taken by using the current prices of goods and services, it…

Q: Suppose a US-owned firm in Canada imported S1000 worth goods from China in 2018. This company ended…

A: Meaning of Gross Domestic Product (GDP): The term gross domestic product refers to the situation…

Q: Personal Consumption Expenditures $620 Saving Government Purchases 50 200 Net Domestic Product 750…

A: Disposable Income is the difference between personal income and personal income tax.

Q: QUESTION 10 In which of the following cases would real income rise? O a. Nominal income rises by 8…

A: Meaning of Gross Domestic Product (GDP): The term gross domestic product refers to the situation…

Q: Say in a hypothetical economy, people consume only two goods – nasi lemak premium and shoes. The…

A: Consumer spends their money on goods and services to get utility. The expenditure of the consumer…

Q: Which of the following is/are true? I. One difference between the CPI and the GDP deflator is that…

A: GDP includes consumption, investment, government expenditure, and net exports. It is also known as…

Q: During 2009, the leather company produced enough leather for 20 couches. The couch manufacturing…

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

Q: in two years is P2,308. What is th inflation if the real rate of interest is 10%? 18. If the…

A: DISCLAIMER “Since you have asked multiple question, we will solve the first question for you. If…

Q: Assume that the average or mean monthly household consumption expenditure for Malaysia rose from…

A: (i) Every 1 percent increase in household wealth leads to an increase of RM5 billion in consumer…

Q: If the price of your cell phone contract increases from R 700 to R 900 over a period of one year and…

A: "Nominal income does not reflect for changes in the price levels and real income reflect for the…

Q: If the inflation rate is 2 percent, interest rates are 8 percent, and GDP is growing at 3 percent…

A: Inflation rate is the rate at which price level is increasing.

Q: Assume that in 1974, interest rates were 7.443% and the rate of inflation was 12.065%. What was the…

A: Given : In 1974,nominal interest rate=7.443% inflation rate =12.065%.

Q: Which of the following holds true when net investment is zero? O The law of motion of capital…

A: In the Solow growth model, savings and investment are the key drivers of economic growth in a…

Q: Net Foreign Factor Income $8 Corporate Profits 47 Gross Private Domestic 73 Investment Proprietors…

A: Net earnings is described as disposable earnings. It is the quantity final after taxes. After-tax…

Q: If the real interest rate increases from 2% to 4%, all other things equal, O a.People will be more…

A: The interest rate is the cost of borrowing for the borrower and yield for the lender. The real…

Q: Suppose a house is built and sold in the year 2006. If the house is resold in the year 2017, would…

A: Answer- Need to find- Suppose a house is built and sold in the year 2006.If the house is resold in…

Q: Suppose Home Depot issues 30-year bonds on which it pays a 5.0% (nominal) interest rate. Further,…

A: As we know Real rate = Nominal interest rate - Actual interest rate we can calculate the following…

Q: Which of these items will increase the level of national income? O a. Higher gross output O b. Lower…

A: In an economy, national income include all the domestic income as well as factor income from abroad.…

Q: If Michelle is a saver and there is an increase in the interest rate, then she will experience: O An…

A: Consumers may increase their savings as interest rates rise, as higher rates of return are…

Q: Deflation can be described as when O $1 can purchase more goods and services. O $1 can purchase less…

A: Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

Q: Assume that nominal GDP is $2,800 billion and the real GDP is $2,000 billion. What is this economy's…

A: The GDP deflator refers to a weighted average of all final product and service prices created in the…

Q: What is the difference between nominal and real interest rates? O A. The nominal interest rate is…

A: Answer: Correct option: E (A and C only) Explanation: Option A is correct because nominal interest…

Q: QUESTION 3 If nominal interest rate increased by 0.2 percentage points and inflation increased by…

A: The relationship between nominal interest rate, real interest rate and inflation rate is as follows:…

Q: Assume an economy produces only footballs and bascballs and the base year is 2017. Quantity Produced…

A: GDP is the sum total of market value of final goods and services produced in a country during a…

Q: If deflation is OCcurring and nominal Gross Domestic Product (GDP) is increasing over time, then…

A: GDP is considered an important factor to evaluate the stability, growth, and performance of an…

Q: . Compute a consumer price index for apples for each year. Assume that year 1 is the base vear in…

A: Since you have posted a question with multiple sub- parts, we will solve first three sub parts for…

Q: Suppose that permanent income is calculated as the average of income over the past five years – that…

Q: Answer both parts A and B a) If the number of unemployed equals 10,000, the number of emploved b) In…

A: a) Given : Number of unemployed people = 10,000Number of employed people = 70,000Number of people…

Q: A simple economy produces only lumber, granola bars, and computers. Annual production of these goods…

A: GDP at constant prices refers to the final value of all the goods and services produced in an…

Q: Assume the GDP for Lindellland is $500 billion. If investment spending is $100 billion, government…

A: Gross domestic product is the market value of all goods and services produced in the economy in a…

Q: Which TWO of the following statements are correct? O a. The value of unsold goods that have been…

A: GDP - it is the value of all finished goods and service produced within a country within specific…

Q: Suppose that this year’s nominal GDP is $16 trillion. To account for the effects of inflation, we…

A: Given Nominal GDP for this year = $16 trillion Real GDP = $15 trillion Now,

Q: Suppose the Consumer Price Index in 2019 is 131.9, with 2002 as the base year. (a) What is the…

A: Answer: Given, Consumer price index (CPI) in 2019 = 131.9 Consumer price index in base year (2002) =…

Q: Let’s assume that the real rate of return is a constant 20%. If inflation is 50%, then the nominal…

A: There is a relationship between the real rate of return and the nominal real rate of return. The…

Q: The GDP deflator in year 4 is 120 and the GDP deflator in year 5 is 130. The rate of inflation…

A: In given we have to find the rate of inflay between years 4 and 5 ?

Q: The table below shows data for a simple economy that produces 2 products only: Ketchup and Tomatoes.…

A: Given:- Two products produce i.e ketchup and tomatoes 70% tomatoes used to make ketchup using base…

Q: 5.0 4.0 3.0 2.0 1.0 1975 1985 1995 2005 Year In the above figure, which period(s) show deflation? O…

A: Deflation refers to general decrease in price level. Disinflation is the decrease in inflation rate.

Q: o answer Questions #1 through #4 use the following information: Suppose that in the nation state of…

A: Answer: Given, Year Quantity of dog food Price of dog food Quantity of kitten chow Price of…

Q: Suppose that the nominal rate of interest is 6 percent and the inflation premium is 1 percent. What…

A: Real interest rate is adjusted for inflation.

Q: To the nearest 0.01, what is the present value of each of the following income streams (expressed in…

A: The difference between the current value of cash inflows and withdrawals over some time is known as…

Q: Suppose that Annie's real income this year is $150 and next year it will be $100. Assume that the…

A: Incomes Y1=150 and Y2=100 And r=0.1

Question

Suppose a person's nominal income increases by 8% while the price level
in the economy increases by 10%. In this case, the person's real income:
O increased by 18%
A) increased by 2%
O decreased by 2%
O decreased by 18%

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

How to Measure Changes in the Cost of Living introduced a number of different price indices. Which price index would be best to use to adjust your paycheck for inflation?
The “prime” interest rate is the rate that bankscharge their best customers. Based on the nominalinterest rates and inflation rates in Table 19.10, inwhich of the years would it have been best to be alender? Based on the nominal interest rates and inflationrates in Table 19.10, in which of the years given wouldit have been best to be a borrower?
Suppose that the nominal GDP in 2017 was $3,968 (in thousands) and 2018 is the base year. Nowthe nominal GDP for years 2018 and 2019 will be the sum of the nominal GDP of the previousyear and the cost-of-living adjustment (COLA.) for the current year. [COLAs per year are equalto the percentage increase of the rate of inflation.] When we calculate the nominal GDP this way,what is this economy’s real GDP each year?
Suppose that at the start of 1999, Ari invests their money in a savings account earning 3.6% interest. If inflation is 1% during 1999, calculate the real interest rate on Ari’s savings account by the end of 1999. Has the inflation-adjusted value of Ari’s savings increased or decreased?
Suppose that Annie's real income this year is $150 and next year it will be $100. Assume that the real interest rate is 10%. How much can Annie consume this year if she borrows against all of her income next year? Round to the nearest whole dollar, type without units (e.g. 10).
Q.1.5 If the inflation rate is 6% and Susan receives a 6% increase in income, then, overthe year, Susan’s:(2)(a) Real and nominal income both remain unchanged;(b) Real and nominal income both rise;(c) Real income rises but nominal income remains unchanged;(d) Nominal income rises but real income remains unchanged.
Let's assume that Enrique borrows $420,000 from the Bank of America and let's assume that the interest rate on this loan is fixed at 9%. If the current inflation is 6%, then the real interest rate in percentage is:
1. If the Consumer Price Index rose from 120 to 138 during a 12 month period. What was the rate of inflation during this time? 2. This year Anjun's monthly pay rose from $1000 (last year's rate) to $1100 (this year's rate). During the year the inflation rate for consumer products was 12%. A. What happened to Anjun's nominal income? (up or down, and by what percent?) Up by 9.09% B. What happened to Anjun's real income? (up or down and by what percent?)
(Please 2 answer s) Question 27 : Consider tablets which are used by a majority of consumers. Suppose that due to the development of 5G technology, tablets underwent a major advance from 2020 to 2021 in terms of the number of functions they could do. The tablets in 2021 sold at the same price as those in 2020. Which of the following would tend to increase in 2021 as a result of this major advance? Select only one : O CPI O Purchasing power of money O GDP deflator O None of the above Question 28 : Suppose a country enters a major recession where the number of unemployed increases a lot and the wages of jobs fall a lot. Assuming no other major changes, what would be the effect of this change on a country's CPI? Select only one : O Increase O Decrease O Stays the same O Unclear
If the CPI in year one is 112 and in year 2 it is 118, we can say that consumer prices rose by about blank . During the inflationary period if a worker received a 3% pay raise when the inflation rate was 7%, it means that the worker’s real wage fell by . Similarly for the economy, if the price level rose by 4% and the nominal output rose by 9%, then the economy’s real output has risen by . If the price of housing (which accounts for 40% of total expenditures in the CPI basket) also rose by 4% while the prices of all the other goods in the CPI basket remained constant, then the CPI would have risen by .
o Calculate the constant flows based on year zero of the following current data o What is the real rate of the flows if the market rate is 18% o In constant pesos, what is the value of the flows in 2015
The CPI is more commonly used as a gauge of inflation than the GDP deflator is becaust the O a. GDP deflator cannot be used to gauge inflation. O b. CPI is easier to measure. O c. CPI better reflects the goods and services bought by consumers. O d. CPI includes more goods and services that the GDP deflator does. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.