Use the following information to answer the next 6 questions. Suppose you have $1000 side money. You have two options: spend this money today, or save it for the future. You are offered the following investment opportunity that if you lend the $1000 out today, you will receive $1200 dollars one year later. You think this is a good deal, accept it, and lend your money out. To keep a track of the price level, you check the Bureau of Labor Statistics webpage, and find that the CPI for today is 100.

1: Your nominal interest rate from this investment is

A: less than or equal to -10%

B: greater than -10% but less than or equal to 0%

C: greater than 0% but less than or equal to 10%

D: greater than 10% but less than or equal to 20%

E: greater than 20%

2: Suppose you expect the CPI to increase to 115 one year from today, the expected inflation rate is

A: less than or equal to -10%

B: greater than -10% but less than or equal to 0%

C: greater than 0% but less than or equal to 10%

D: greater than 10% but less than or equal to 20%

E: greater than 20%

3: Suppose you expect the CPI to increase to 115 one year from today, the expected real interest rate from this investment is:

A: less than or equal to -10%

B: greater than -10% but less than or equal to 0%

C: greater than 0% but less than or equal to 10%

D: greater than 10% but less than or equal to 20%

E: greater than 20%

4: One year later, it turns out that the CPI increases to 140. The actual inflation rate is

A: less than or equal to -10%

B: greater than -10% but less than or equal to 0%

C: greater than 0% but less than or equal to 10%

D: greater than 10% but less than or equal to 20%

E: greater than 20%

5: One year later, it turns out that the CPI increases to 140. Your actual real interest rate from this investment is:

A: less than or equal to -10%

B: greater than -10% but less than or equal to 0%

C: greater than 0% but less than or equal to 10%

D: greater than 10% but less than or equal to 20%

E: greater than 20%

6: You expected the CPI to increase to 115 one year from now, but it turns out that the CPI indeed rose to 140 after a year. Which of the following statements correctly describes your situation?

A: The expected real interest rate is greater than the actual real interest rate, and you benefit from the unanticipated price rise

B: The expected real interest rate is smaller than the actual real interest rate, and you benefit from the unanticipated price rise

C: The expected real interest rate is greater than the actual real interest rate, and you lose from the unanticipated price rise

D: The expected real interest rate is smaller than the actual real interest rate, and you lose from the unanticipated price rise

E: None of the above

7: Which of the following statement correctly describes the property of production function

A: Other things equal, an increase in productivity increases marginal product of labor (MPN)

B: Other things equal, an increase in productivity decreases marginal product of labor (MPN)

C: Other things equal, an increase in capital decreases marginal product of labor (MPN)

D: None of the above