1. The average house price in 1972 was $100,000, and $320,000 in 2000. CPI was 38 in 1972 and 145 in 2000.

1. Calculate the rate of inflation between 1972 and 2000.
2. What is the average house price in 2000 in real terms (i.e. in terms of the 1972 average house price)?
3. Have average house prices become more expensive in real terms? Justify your answer.
4. Would banks be happy or reluctant to lend money if a country has a history of inflation rising unexpectedly? Justify your answer