Exercise 1

In 2005 the nominal inom of a family equal to 20.000 euro and in 2011 to 22.000 eu Knowing that CPI in 2005 is equal to 100 and CPI in 2011 is equal to 1.25, say if the family is wone off or better off

Exercise 2

Compute the real interest rate when the nominal interest rate is equal o 7% and the inflation rate is equal to -2% What happens to the real interest rate if the inflation rate becomes positive and equal to 2 Comment on both results