Suppose you are a Social Security recipient. In 2006 you receive $700 per month in Social Security benefits. In October of that year the Social Security Administration announces that the cost-of-living adjustment for 2007 will be 3.2 percent, roughly matching the overall inflation rate. Instructions: Enter your response rounded to the nearest cent (two decimal places). a) How much will your 2007 monthly benefits be? $ b) In real terms, your benefits (Click to select) v Next 28 of 67
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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.The total price of purchasing a basket of goods in the United Kingdom over four years is: year 1=940, year 2=970, year 3=1000, and year 4=1070. Calculate two price indices, one using year 1 as the base year (set equal to 100) and the other using year 4 as the base year (set equal to 100). Then, calculate the inflation rate based on the first price index. If you had used the other price index, would you get a different inflation rate? If you are unsure, do the calculation and find out.Interest, inflation, and purchasing power Suppose Diamond is a fashionista and buys only denim jackets. Diamond deposits $4,000 into a savings account that pays an annual nominal interest rate of 5%. Assume this interest rate is fixed, and so it will not change over time. On the day she makes her deposit, suppose that a denim jacket has a price of $20.00. Initially, Diamond's $4,000 deposit has a purchasing power of #________ denim jackets. For each of the annual inflation rates given in the following table, first determine the new price of a denim jacket, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Diamond's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest denim jacket. For example, if you find that the deposit will cover 20.7 denim jackets, you…
- Suppose Cho is a cinephile and buys only movie tickets. Cho deposits $3,000 in a bank account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a movie ticket is priced at $15.00. For each of the annual inflation rates given in the following table, first determine the new price of a movie ticket, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Cho's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest movie ticket. For example, if you find that the deposit will cover 20.7 movie tickets, you would round the purchasing power down to 20 movie tickets under the assumption that Cho will not buy seven-tenths of a movie ticket. Number of tickets Cho can purchase options:…Suppose Cho is a cinephile and buys only movie tickets. Cho deposits $3,000 in a bank account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a movie ticket is priced at $15.00. For each of the annual inflation rates given in the following table, first determine the new price of a movie ticket, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Cho's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest movie ticket. For example, if you find that the deposit will cover 20.7 movie tickets, you would round the purchasing power down to 20 movie tickets under the assumption that Cho will not buy seven-tenths of a movie ticket. Fill in the annual inflation chart Choices…a)Suppose you earn a 3% wage increase from your employer. Then, the government releases economic data indicating the inflation rate is running at 5%. Are you better off? Based upon changes in your real wages, did your standards of living improve ? b) suppose you took out 20,000 in student loans at a fixed interest rate of 5%. Assume that after you graduate, inflation rises significantly as you are paying back your loans. Does this rise in inflation benefits you in paying back your student loans? Who hurt more from unexpected higher inflation, a borrower or a lender? c) in January 1980 the CPI stood at 77.8. By January 2006 the CPI was 198.3. By what percent have consumer prices increased over this period? Assume college graduates entering the job market in 1980 were being paid on average $1200 per month. Assume college graduates entering the job market in 2006 were being paid on average $3000 per month. Are the newer graduates paid more or less in real terms?
- Suppose you earn an income of $50000 a year. You purchase the bundle of goods and services on your budget constraint line that maximizes your utility. The budget constraint line is shown in the graph below. Over the next year, prices for goods and services increase overall by %5 because of inflation, but your income remains fixed at $50000. Which graph illustrates this change?Which of the following describes the interest rate on an investment after calculating the impact of inflation?O NominalO RealO FinancialO Profit5 On March 7, 2018, you could read in The New York Times that the Governor of West Virginia offered the state's teachers "a 1 percent a year raise for the next five years." The article noted that "if inflation averages 2 percent a year for that period, this translates into an effective 5 percent pay cut." [R170] Is the “5 percent pay cut” claim correct
- Suppose a person works hard at a job after graduation and after her first year, her effort is rewarded with a 3% raise when the average wage increase in her company is 2%. Later, the government releases its inflation report and says that the inflation rate is 7%. Given this information, which of the following is true regarding her standard of living? Her standard of living has improved because the 3% raise is enough to offset the average rise in prices. Her standard of living did not improve because the purchasing power of her income is less than it was last year. Her standard of living has remained the same because the rate of inflation does not influence purchasing power. Her standard of living has increased by the amount of inflation, namely, 7%.calculate the percentage of inflation rate: -If the price level rises from 100 to 102 over a year ..................................................... - If it rises to 103 the next year, thenThe inflation rate for that year is............................Suppose Neha is a sports fan and buys only baseball caps. Neha deposits $3,000 in a bank account that pays an annual nominal interest rate of 5%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a baseball cap is priced at $10.00. Initially, the purchasing power of Neha's $3,000 deposit is$______________baseball caps. For each of the annual inflation rates given in the following table, first determine the new price of a baseball cap, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Neha's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest baseball cap. For example, if you find that the deposit will cover 20.7 baseball caps, you would round the purchasing power down to 20 baseball caps under the assumption that…
