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1. State the distinction between the consumer price index (CPI) and the GDP price index? 2. Discuss with examples the redistribution cost of inflation. 3.
1. State the distinction between the consumer price index (CPI) and the GDP price index? 2. Discuss with examples the redistribution cost of inflation. 3. Given the following data for an economy: Consumer price index was 120 and 150 in 2014 and 2015, respectively, and nominal wages in Saudi riyals were 48,000 and 60,000 in 2014 and 2015, respectively. Based on this information find the following: a. Inflation rate in 2015. b. Real wage in 2015. 4. Suppose the nominal interest rate is currently 12 percent. a. If the inflation rate is zero, what is the real interest rate? b. The inflation rate rises to 13 percent while the nominal interest rate remains at 12 percent. Does it make sense to lend money under these circumstances? 5. Based on the following data for a hypothetical economy. Millions Government Purchases Exports Consumption and spending Imports Private investment Spending $2000 $2650 $4800 $2400 $2000 Calculate the GDP using the expenditure approach
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