Question 29: Suppose you'll have an annual nominal income of $40,000 for each of the next three years, and the inflation rate is 5 percent per year: a) Find the real value of your $40,000 salary for each of the next three years. b) If you have a COLA in your contract, and the inflation rate is 5 percent, what is the real value of your salary for each year? Question 30: Suppose you borrow $1000 of principal that must be repaid at the end of two years, along with interest of 5 percent a year. If the annual inflation rate turns out to be 10 percent: a) What is the real rate of interest on the loan? b) What is the real value of the principal repayment? Who loses, (A) the debtor (B) or the creditor? (Enter A or B.)Question 32: Suppose a government has no debt and a balanced budget. Suddenly it decides to spend $5 trillion while raising only $4.5 trillion worth of taxes. What will be the government's deficit? b) If the government finances the deficit by issuing bonds, what amount of bonds will it issue? C) At a 4 percent rate of interest, how much interest will the government pay each year? d) Add the interest payment to the government's $5 trillion expenditures for the next year and assume that taxes remain at $4.5 trillion. In the second year, compute the Deficit Amount of new debt (bonds) issued (iii Total debt at end of year (iv) Debt service requirement Question 33: Suppose that an economy is characterized by: M = $12 trillion V = 1.8 P = 1.0 a) What is the real value of output (Q)? Now assume that the Fed increases the money supply by 10 percent and velocity remains unchanged. b) If the price level remains constant, by how much will real output increase? c) If, instead, real output is fixed at the natural level of unemployment, by how much will prices rise? d) By how much would V have to fall to offset the increase in M? Question 34: Apples can be harvested by hand or machine. Handpicking yields 80 pounds per hour; mechanical pickers yield 120 pounds per hour. (a) If the wage rate of human pickers is $8 an hour and the rental on a mechanical picker is $15 an hour, which is more cost-effective? (b) If the wage rate increased to $12 an hour, which would be more cost- effective