PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 6, Problem 4P
To determine
Identify the adjustment in the income tax schedule in 2016.
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If the price of your cell phone contract increases from R 700 to R 900 over a period of one year and your income rises from R15 000 to R15 500 during that same period, your nominal income has…
a) Increased, and your real income has increased.
b) Increased, but your real income has decreased.
c) Decreased, and your real income has decreased.
d) Increased, but your real income has remained the same.
if the nominal interest rate is 18 percent and the real interest rate is 10 percent, the inflation rate is
According to the Fischer equation, if the nominal interest rate is 8% and inflation is running at 4% then the real interest rate is?
12%
8%
4%
2%
Chapter 6 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
Ch. 6 - Prob. 1RQCh. 6 - Prob. 2RQCh. 6 - Prob. 3RQCh. 6 - Prob. 4RQCh. 6 - Prob. 5RQCh. 6 - Prob. 6RQCh. 6 - Prob. 7RQCh. 6 - Prob. 8RQCh. 6 - Prob. 1PCh. 6 - Prob. 2P
Ch. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Prob. 7PCh. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - Prob. 10PCh. 6 - Prob. 6.1CCCh. 6 - Prob. 6.2CCCh. 6 - Prob. 6.3CCCh. 6 - Prob. 6.4CCCh. 6 - Prob. 6.5CCCh. 6 - Prob. 6.6CCCh. 6 - Prob. 6.7CCCh. 6 - Prob. 6.8CCCh. 6 - Prob. 6.9CC
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- Suppose you take out a loan at your local bank. The bank expects to earn an annual real interest rate equal to 33%. Assuming that the annualized expected rate of inflation over the life of the loan is 11%, determine the nominal interest rate that the bank will charge you.arrow_forwardIf the nominal interest rate was 12% and the inflation rate was 10% in 1980, while the nominal interest rate was 7% and the inflation rate was 2% in 2001, then real rates were higher in 2001 real rates were higher in 1980 credit was more expensive in 1980 credit was cheaper in 2001 because the nominal rate was lowerarrow_forwardWhich of the following was a way for the Bureau of Labor Statistics to reduce the quality/new good bias in its calculation of the CPI? Remove energy and food prices. Allow for some substitution amongst products. Update the list of products included in the CPI more often and rapidly. Automatically reduce the inflation by 0.5% to account for quality/new good bias.arrow_forward
- The average cell phone from today has many more features than a cell phone from 10 years ago. The increase in prices of cell phones will be improperly picked up by the CPI. This is an example of: quality change bias none of these base year bias substitution bias new goods biasarrow_forwardSuppose you purchase a $1,500 TIPS on January 1, 2020. The bond carries a fixed coupon rate of 5.5 percent. Over the first two years, semiannual inflation is 1.5 percent, 1.5 percent, 4 percent, and 3 percent, respectively. What is the principal at the end of month 6?arrow_forwardIf the nominal interest rate is 10 percent and the real interest rate is 5 percent, the inflation rate is 5 percent. 10 percent. 15 percent. 2 percent.arrow_forward
- As a first step in computing the consumer price index (CPI), a survey of consumers is done to determine the “basket of goods” purchased by a typical consumer. Suppose that 2009 is given as the base year and, consistent with the data shown in the table above, it was decided that the basket of goods in this economy should consist of one unit of food and two units of clothing. I. Using 2009 as the base year,what is the CPI in each year: 2009, 2010, and 2011? ii. What is the inflation rate in 2010 and 2011?arrow_forwardWage agreements and loan contracts are two types of multiperiod agreements that are important for economic growth. Suppose you sign a two-year job contract with Wells Fargo stipulating that you will receive an annual salary of $93,500 plus an additional 2% above that in the second year, to account for expected inflation. If the inflation rate turns out to be 3% rather than 2%, who will be hurt? Why? If the inflation rate turns out to be 1% rather than 2%, who will be hurt? Why?arrow_forwardSuppose the price level reflects the number of dollars needed to buy a basket of goods containing one can of soda, one bag of chips, and one comic book. In year one, the basket costs $10.00. In year two, the price of the same basket is $11.00. From year one to year two, there isinflation at an annual rate of . In year one, $70.00 will buy7 baskets, and in year two, $70.00 will buy baskets. This example illustrates that, as the price level rises, the value of moneyarrow_forward
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