Question
1.A consumer expenditure survey reports the following information on consumer spending: 2020 2021 Price Quantity Price Quantity Product (1) $10 7 $10 7 Product (2)
1.A consumer expenditure survey reports the following information on consumer spending:
2020
2021
Price
Quantity
Price
Quantity
Product (1)
$10
7
$10
7
Product (2)
$6
10
$8
12
Product (3)
$12
5
$14
10
a)Using 2020 as the base year, by how much does a "cost of products" index increase between 2020 and 2021?
b)Calculate the inflation rate between 2020 and 2021, using the CPI you calculated in (a)
2.The CPI equals 1.00 in year one and 1.40 in year two. If the nominal wage is $3000 in year one and a contract calls for the wage to be indexed to the CPI, what will be the nominal wage in year two?
3.Waleed is lending Emad $1,000 for one year. The CPI is 1.40 at the time the loan is made. They expect it to be 1.54 in one year. If Waleed and Emad agree that Waleed should earn a 6% real return for the year, what is the nominal interest rate?
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