EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 16, Problem 8DQ
To determine
The difference between real interest rate and nominal interest rate.
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D Question 26
A corporation issues a bond with a par value of $4,800 in one year. Assume that the bond is sold
today for $4,500. What is the interest rate received by the lender?
O 3.33%
O 11.11%
O 6.67%
6.25%
D
Question 27
The U6 unemployment rate includes which individuals that are not included in the U3
unemployment rate?
O government employees
O people who volunteer
O self-employed individuals
O people who are working part-time but want full-time work
O members of the population that are under the age of 16
Question 3
1. Suppose that inflation is 5% between years 1 and 2. Now suppose your hourly
wage is $20/hour. What will your wage have to be for your real wage to stay
the same from year 1 to year 2?
O 20.10
O 30
O 25.75
O 21
Suppose the consumer price index (CPI) stands at 250 this year. If the inflation rate is 10 percent,
then next year's CPI will equal:
O 260
$260
O $275
O 275
Chapter 16 Solutions
EP ECONOMICS,AP EDITION-CONNECT ACCESS
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Similar questions
- Suppose, you are lending money to your friend Julia and you want a real rate of return of 8.00%. Furthermore, you expect the inflation rate to be 4.50%. Which of the following interest rates should you charge? O A. 6.25% O B. 12.50% O C. 8.00% O D. 3.50% Click to select your answer. lenovo V560arrow_forwardAssume that John has a car loan with a nominal interest rate of 4%. If the actual inflation rate is 3%, then the real rate is 3% 4% O 7% O 1%arrow_forwardThe consumer price index was 100 in 1994 and 103.3 in 1995. Therefore, the rate of inflation in 1995 was about: O 3.3 percent O 2.8 percent O 4.4 percent 1 pts O 6 percentarrow_forward
- If the inflation rate is 3 percent and the nominal interest rate is 8 percent, how much is the after-tax real interest rate if the government imposes a 20 percent interest income tax? O a. 3.4 percent O b. 4 percent O c. None of the above O d. 5.4 percent.arrow_forwardSuppose a person receives a 9% increase in pay when inflation is 8%. In this case, the nominal increase is ______________, and the real increase is If the employee overestimates the real gain, this would be an example of O 9%, 8%, price confusion O 9%, 8%, menu costs O 1%, 8%, shoe leather costs O8%, 1%, sticky wages O9%, 1%, employee misperceptions 1arrow_forwardLet us assume you have $1000 to spend on buying books. Each book costs on average $50 and are expected to increase in price by 4%. If you invest your money now, you will be able to buy 21 books in years time for what 20 books cost today. What interest rate you need to find in nominal terms to overcome effects of inflation and still realize reward for waiting? O A. 10,5% O B. -1.0% O C. 9.0% O D. 8.05%arrow_forward
- If the CPI increases from 135 in 2006 to 154 in 2007, the rate of inflation between 2006 and 2007 is: O 14.1 percent O 12.3 percent O 6.2 percent O 19.0 percentarrow_forwardSuppose that the consumer price index at year-end 2008 was 140 and by year-end 2009 had risen to 154. What was the inflation rate during 2009? 7.1 percent 10 percent O 14.2 percent O 9.1 percentarrow_forwardSuppose that the actual unemployment rate in a country is 7.7 percent. If the country's frictional unemployment rate is 3.5 percent and its structural unemployment rate is 1.1 percent, what is its cyclical unemployment rate? O 11.7 percent O 3.1 percent O 5.3 percent O 4.1 percent ۵arrow_forward
- D Question 14 Suppose for the country of Joshua-land, the annual inflation rate is 7%, the population growth is 5% per year while GDP increases by 2% per year. How long would it take for the country to double its GDP? O 7 years O 14 years 35 years O Never Question 15 For the previous question, how long would it take Joshua-land to double its GDP capita? per O 7 years O 14 years O 35 years Never Question 16 For Joshua land, how long would it take for prices to double? O 7 years O 10 years 35 years O Not enough informationarrow_forward"If the consumer price index was 102 in the base year and 117 in the following year, the inflation rate was" O 15 percent. 14.7 percent. 7 percent. O 1.07 percent.arrow_forwardWhat is the expected real after-tax interest rate, when interest rate is 5%, expected inflation rate is 2% and tax rate is 30% O a. 2.0% O b. 3.0% O c. 2.5% O d. 1.5%arrow_forward
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