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Scenario | Shows up in the... | |
|---|---|---|
GDP Deflator | CPI | |
| A decrease in the price of a Rivertown Ltd. depths dredger, which is a commercial mining product used for underwater mineral extraction, made in the U.S., but not bought by U.S. consumers | ||
| An increase in the price of a Scandinavian-made coffee maker that is popular among U.S. consumers | ||
The GDP deflator for this year is calculated by dividing thevalue of all goods and services produced in the economy this year using this year’s prices by thevalue of all goods and services produced in the economy this year using the bas...
Read MoreEquivalent Salary in California=Salary in Oklahoma×RPP in OklahomaRPP in CaliforniaGiven:Salary in Oklahoma = $60,000RPP in Oklahoma = 91.3RPP in California = 111.2Substitute these values into the formula:Equivalent Salary in California=60...
Read Moreb. lenders will gain at the expense of borrowers...
Read MoreReal Interest Rate=Nominal Interest Rate−Inflation RateCalculations:a. The nominal rate of interest is 12 percent and the inflation rate is 9 percent:Real Interest Rate=12%−9%=3%\text{Real Interest Rate} = 12\% - 9\% = 3\%b. The nominal rate of interest is 15 perce...
Read Morea. The nominal rate of interest is 5 percent and the inflation rate is 1 percent....
Read MoreNominal Interest Rate=Real Interest Rate+Inflation RateGiven:Real Interest Rate = 3%Inflation Rate = 6%Substitute these values into the formula:Nominal Interest Rate=3%+6%=9%\text{Nominal Interest Rate} = 3\% + 6\% = 9\%Final Answer:c. 9 percent...
Read Moreb. The real interest rate is the nominal interest rate minus the inflation rate....
Read MoreReal Interest Rate=Nominal Interest Rate−Inflation RateGiven:Nominal Interest Rate = 4%Inflation Rate = 2%Substitute these values into the formula:Real Interest Rate=4%−2%=2%\text{Real Interest Rate} = 4\% - 2\% = 2\%Real Interest Rate=4%−2%=2%Final Answe...
Read Morea) FallenStep 1: Calculate the percentage increase in incomePercentage Increase in Income=51,000−39,00039,000×100=12,00039,000×100≈30.77%\text{Percentage Increase in Income} = \frac{51,000 - 39,000}{39,000} \times 100 = \frac{12,000}{39,000} \times 100 \approx 30.77\%Step 2: Calculate...
Read MoreUse the following table to answer the question. The table shows the prices and the quantities consumed in Vegetarian Country. Suppose the base year is 2020. Also, suppose that 2020 is the year the typical consumption basket was determined, so the quantities consumed in 2020 are the only quantities needed to calculate the CPI in each year.
| Year | Price of Carrots | Quantity of Carrots | Price of Celery | Quantity of Celery |
| 2020 | $2.00 | 100 | $1.00 | 100 |
| 2021 | 2.50 | 90 | 0.90 | 120 |
| 2022 | 2.75 | 105 | 1.00 | 130 |
Suppose the base year is changed in the table from 2020 to 2022. Also, suppose that the typical consumption basket was now determined in 2022 (now use the 2022 consumption basket). What is the new value of the CPI in 2021?
Step 1: Calculate the cost of the basket in the base year (2022)Price of Carrots in 2022 = $2.75Price of Celery in 2022 = $1.00Quantity of Carrots in 2022 = 105Quantity of Celery in 2022 = 130Cost of Basket in 2022=(2.75×105)+(1.00×130)=288.75+130=418.75\text{Cost of Basket in 20...
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