Economics, Student Value Edition (7th Edition)
7th Edition
ISBN: 9780134739229
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 22, Problem 22.1.5PA
To determine
The interest rates earned.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Let us use what we have learned in the first part of the chapter to compare living standards in the United States and a hypothetical country, Argonia, in 2008.
The U.S. GDP in 2008 was approximately $14 trillion, and the U.S. population was approximately 300 million. What was the per capita GDP in the United States in 2008?
Suppose that in the local currency, Argonian dollars, Argonia’s GDP in 2008 was 1 trillion, and its population was 10 million. What was Argonia’s GDP per capita in Argonian dollars? What problems do you foresee in comparing this number to the U.S. GDP per capita in U.S. dollars computed in part (a)?
The Argonian dollar/U.S. dollar exchange rate was equal to 6 on January 1, 2008 (meaning that 1 U.S. dollar was worth 6 Argonian dollars) and reached 9 on August 1, 2008. Compute an exchange-rate-based measure of the GDP per capita in Argonia in U.S. dollars on these two dates. Do you think the change in Argonia’s exchange-rate-based measure of GDP per capita…
Suppose an economy that produces and consumes apples, bread, and toy-cars. In the
following table are data for two different years.
2019 2020
Good Quantity Price Quantity Price
Apples 50 Rs.50 60 Rs.60
Bread 200 Rs. 20 180 Rs.25
Cars 25 Rs. 100 30 Rs.140
a. Using 2019 as the base year, compute the following statistics for 2019 and 2020 in the table
given below:
Statistics 2018 2019
GROSS DOMESTIC PRODUCT
Nominal GDP
Real GDP
GROWTH RATE
Growth Rate of Nominal GDP
Growth Rate of Real GDP
PRICE INDICES
GDP deflator
Inflation rate using GDP deflator -
CPI (a fixed-weight price index)
Inflation rate using CPI
b. How much did the cost of living rise between 2018 and 2019? Compare the answers given by
GDP deflator and CPI. Explain the difference.
c. Explain which price index (GDP deflator or CPI) should be used to adjust the salaries,
budget or spending to counterbalance the changes in the cost of living? Why?
Regarding the previous page, consider you and your partner are able to sell your current property and invest in a small guest house in Blackpool, a seaside resort in the UK, for the same amount of money. The guest house has eight double bedrooms. It is a bit run down. You currently work as a school teacher and your partner has been unemployed for a number of years. Outline the factors that would determine whether or not this is a good investment taking in consideration the opportunity cost and that your business partner is unemployed.
Chapter 22 Solutions
Economics, Student Value Edition (7th Edition)
Ch. 22 - Prob. 22.1.1RQCh. 22 - Prob. 22.1.2RQCh. 22 - Prob. 22.1.3PACh. 22 - Prob. 22.1.4PACh. 22 - Prob. 22.1.5PACh. 22 - Prob. 22.1.6PACh. 22 - Prob. 22.1.7PACh. 22 - Prob. 22.1.8PACh. 22 - Prob. 22.2.1RQCh. 22 - Prob. 22.2.2RQ
Ch. 22 - Prob. 22.2.3RQCh. 22 - Prob. 22.2.4RQCh. 22 - Prob. 22.2.5PACh. 22 - Prob. 22.2.6PACh. 22 - Prob. 22.2.7PACh. 22 - Prob. 22.2.8PACh. 22 - Prob. 22.2.10PACh. 22 - Prob. 22.2.11PACh. 22 - Prob. 22.2.12PACh. 22 - Prob. 22.3.1RQCh. 22 - Prob. 22.3.2RQCh. 22 - Prob. 22.3.3PACh. 22 - Prob. 22.3.4PACh. 22 - Prob. 22.3.5PACh. 22 - Prob. 22.3.6PACh. 22 - Prob. 22.4.1RQCh. 22 - Prob. 22.4.2RQCh. 22 - Prob. 22.4.3RQCh. 22 - Prob. 22.4.4PACh. 22 - Prob. 22.4.5PACh. 22 - Prob. 22.4.6PACh. 22 - Prob. 22.4.8PACh. 22 - Prob. 22.4.9PACh. 22 - Prob. 22.4.10PACh. 22 - Prob. 22.4.11PACh. 22 - Prob. 22.4.12PACh. 22 - Prob. 22.5.1RQCh. 22 - Prob. 22.5.2RQCh. 22 - Prob. 22.5.3PACh. 22 - Prob. 22.5.4PACh. 22 - Prob. 22.5.5PACh. 22 - Prob. 22.5.6PACh. 22 - Prob. 22.5.7PACh. 22 - Prob. 22.5.8PACh. 22 - Prob. 22.5.9PACh. 22 - Prob. 22.1RDECh. 22 - Prob. 22.2RDECh. 22 - Prob. 22.3RDE
Knowledge Booster
Similar questions
- The magazine Women of China reported that Chinese women in big cities spent 63% of their income on consumer goods last year, up from a meagre 26% in 2007. Clothing accounted for the biggest chunk of that spending, at nearly 30%, followed by digital products such as cellphones and cameras (11%) and travel (10%). Chinese consumption as a whole grew faster than the overall economy in the first half of the year and is expected to reach 42% of GDP by 2020, up from the current 36%. Source: The Wall Street Journal, August 27, 2010 If the economy had been operating at a full employment equilibrium, (a) Describe the macroeconomic equilibrium after the rise in consumer spending. (b) Explain and draw a graph to illustrate how the economy can adjust in the long run to restore a full-employment equilibrium.arrow_forwardLori is a student who teaches golf on the weekend and in a year earns $20,000 after paying her taxes. At the beginning of 2010, Lori owned $1,000 worth of books, CDs, and golf clubs and she had $5,000 in a savings account at the bank. During 2010, the interest on her savings account was $300 and she spent a total of $15,300 on consumption goods and services. There was no change in the market values of her books, CDs, and golf clubs. (i) How much did Lori save in 2010? (ii) What was her wealth at the end of 2010?arrow_forwardThe following abstract appeared in gultnews.com on January 14th, 2019. "The UAE is forecast to achieve an annual average real GDP growth rate of 3.89% between 2019 and 2023, supported by an increase in investment Nows and private consumption A Would the nominal rate be less, the same or more than 3.8% Explain your answer discussing the difference between nominal GDP and8 GDP is used up by FOUR ultimate users Who are they? C Discuss whether the method that you use to calculate GDP influence the final resultarrow_forward
- You looked at many economic indicators, including data regarding unemployment, GDP, housing starts, and consumption spending. Which of the following economic indicators NOT including those four would you likely see to support this analysis of the economy? The consumer confidence index is likely rising Inflation (the general price level of goods and services) is likely increasing Stock share prices are likely decreasing New businesses are likely being openedarrow_forwardConsider a simple economy whose only industry is fishing. In this industry, productivity is measured by the number of fish one fisherman catches per hour. In the following table, match each example to the productivity determinant it represents.arrow_forwardIf two economies are identical, except the savings rate in one economy is higher, explain why we might expect the economy with the higher savings rate to grow faster and in that sense be healthier.arrow_forward
- 1 ) On January 1, 2026 each of Boblandia's 100 workers has $1 in physical capital. Over the course of the year, its physical capital depreciates by 5%, and the number of workers increases by 5%. How much does Boblandia have to invest in 2026 to make sure that its capital to labour ratio is the same on January 1, 2027 as it was on January 1, 2026arrow_forwardGeorge and Al, stranded on an island, use clamshells for money. Last year George caught three hundred fish and five wild boars. Al grew 200 bunches of bananas. In the two-person economy that George and Al set up, fish sell for one clamshell each, boars sell for ten clamshells each, and bananas go for five clamshells a bunch. George paid Al a total of thirty clamshells for helping him to dig bait for fishing, and also he purchased five of Al's mature banana trees for thirty clamshells each. Explain what the value of GDP is (in clamshells) in George and Al's island. Using economic terminology and your understanding of GDP explain why you included or excluded each itemarrow_forwardThis question addresses the impact of saving on an economy by examining what happens if tax laws change to induce saving and how changes in tax laws can discourage saving. The following graph shows the market for loanable funds. Show the impact of a change in the tax law that successfully encourages saving by shifting either the demand curve (D), the supply curve (S), or both. A tax law change that successfully encourages saving will (increase/decrease) interest rates, which leads to (less/more) investment and economic growth. To better understand how changes in tax laws can affect saving, suppose that Madison, a rising third-year in college, plans to save $550 from her summer job in order to buy textbooks for the upcoming fall semester. Madison's parents are so impressed with her plans that they offer to pay her an additional 30% interest per month on the money she saves, which means that Madison is now earning a large rate of return on her saving. By the end of the…arrow_forward
- Consider a simple two-sector economy containing manufacturing and agricultural industries. Manufacturing industry requires $20 million worth of its own product and $40 million worth of agricultural industry output in the process of supplying $75 million worth of its own product to final consumers. Similarly, agricultural industry requires $20 million worth of its own product and $20 million worth of manufacturing industry output in the process of supplying $20 million worth of its own product to final consumers. The primary suppliers provide inputs to manufacturing and agricultural industries worth $40 and $60 million, respectively and purchase the final outputs of $5 million. The initial sales/purchase is $30 million for manufacturing and $15 million for agriculture industry. Calculate:i. The direct and indirect sales.ii. Explain the total economic impact briefly.arrow_forwardAssume an economy in which only broccoli and cauliflower are produced. In year 1, 500 million pounds of broccoli are produced and consumed and its price is $0.50 per pound, while 300 million pounds of cauliflower are produced and consumed and its price is $0.80 per pound. In year 2, 400 million pounds of broccoli are produced and consumed and its price is $0.60 per pound, while 350 million pounds of cauliflower are produced and consumed and its price is $0.85 per pound. (a) Using year 1 as the base year, calculate the GDP price deflator in years 1 and 2, and calculate the rate of inflation between years 1 and 2 from the GDP price deflator. (b) Using year 1 as the base year, calculate the CPI in years 1 and 2, and calculate the CPI rate of inflation.arrow_forwardUSA Today noted that the destruction caused by three 2004 hurricanes, combined with the already high real-estate prices, were making people reconsider retiring to Florida. The cost of homeownership was increasing partly because past hurricanes had roughly doubled insurance premiums statewide. Construction costs could rise due to stricter building codes. Some people, however, did not expect the influx of retirees to change because the baby boom generation was approaching retirement age and Florida had long attracted many retirees. Which of the following factors is tending to move the demand curve for Florida housing to the right? a.The aging of the baby boomers, increasing the number of people who are retiring. b.The increase in the cost of insurance. c.The already high real-estate prices. d.The current high construction costs.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning