1. The real GDP in the third quarter of 2021 was found to be $500,000 and the number of hours worked was 5,000. In the third quarter of 2022, the real GDP increased to $720,000 while the number of hours worked increased to 6,000. Given these values, solve for labor productivity in both quarters and solve for the growth rate of labor productivity between the two quarters.

2. The typical household purchases two goods: limes and lemons. Each month, the household purchases 12 limes, while also purchasing 20 lemons. In July 2021, the limes, on average, had a price of $0.65 per lime and the price of the lemons was $0.60 per lemon. In July 2022, the price of the limes, increased to $0.70 per lime and the price of the lemons increased to $0.75 per lemon.

2a. Using these values, solve for the CPI, assuming that July 2021 is the base month.

2b. Solve for the CPI growth rate between July 2021 and July 2022.

3. Wages

3a. If your wage in June 2022, according to your employer is $21.00 per hour, making your total wage for the month, which is the frequency with which the CPI is measured, a total of $2940, and the CPI is 113.67, solve for the real wage for the month of June 2022, based upon the total wage of $2940 received for the month of June 2022.

3b. If you do not receive a wage increase in July 2022, but the CPI rises to 115.41, solve for the real wage for the month of July 2022, based upon the total wage of $2940.

3c. What is the relationship between the real wage and the CPI?

4. Suppose you take out a loan for school this year for $17,500. The bank expects that the rate of inflation for next year will equal 8%. You and the bank agree that in one year's time, you will pay back the full amount at an interest rate of 13%. Next year though, there is a sudden rise in inflation, causing inflation to equal 15%.

Based upon this information, answer the following questions.

4a. How much will you pay back in one year, assuming simple interest?

4b. What is the numerical value for the anticipated rate of inflation?

4c. What is the numerical value for the unanticipated rate of inflation?

4d. What is the numerical value for the real rate of interest?

4e. What is the numerical value for the nominal rate of interest?

4f. Who wins and who loses from this loan example?