Calculate a price index for 2011, 2012, and 2013 using the following information about prices. Let the market basket consist of one pizza, two sodas, and three video rentals. YEAR PRICE OF A PIZZA PRICE OF A SODA PRICE OF A VIDEO RENTAL 2011 $ 9.00 $ 0.50 $ 2.00

2012 $ 9.50 $ 0.53 $ 2.24

2013 $ 10.00 $ 0.65 $ 2.90

1. What is the real interest rate if the nominal interest rate went is 12 percent and the inflation rate is 8 percent?

2. What would be the real rate interestif the nominal interest rate went from 12 percent to 8 percent and the inflation rate went from 8 percent to 4 percent?