A real price is A price after deflation has occurred. O A nominal price plus the inflation rate. An average price for a given time period. A price that has been corrected for inflation.
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- Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time payment of 20,000. However, if the inflation rate is 6 per year, how much buying power will that 20,000 have when measured in todays dollars? Hint: Start by calculating the rise in the price level over the 16 years.A fixed-rate mortgage has the same interest rate over the life of the loan, whether the mortgage is for 15 or 30 years. By contrast, an adjustable-rate mortgage changes with market interest rates over the life of the mortgage. If inflation falls unexpectedly by 3, what would likely happen to a homeowner with an adjustable-rate mortgage?Inflation rates, like most statistics, are imperfect measures. Can you identify some ways that the inflation rate for fruit does not perfectly capture the rising price of fruit?
- Real Income Joshua Vermier of Sacramento, California, received a raise after his first year on the job to $44,200 from his initial salary of $40,000. What was Joshua's raise stated as a percentage? Inflation averaged 2.4 percent for the year. Round your answer to one decimal place. What was his real income after the raise? Round your answer to nearest cent. What was his real raise stated as a percentage? Round your answer to one decimal place. %If inflation is 4 percent per year and you receive a 3 percent raise in income, then your:The nominal interest rate is 3% in the economy. Shawn is deciding to give loan to his friend at this rate. The prevailing inflation rate is 2.5% Should Shawn give loan to his friend or not?
- Forty years ago, a gallon of gas cost $1.20. Today, a gallon of gas costs 2.60. Suppose that the gas price increase has been entirely due to inflation. a. Calculate the annual inflation rate. b. Today, you plan to make a cash purchase for a new car. The Model K costs $24,000 and you estimate the car will last 10 years and require 600 gallons per year. The Model M costs $28,000 but gets better mileage, so it will only require 400 gallons per year. The cars are identical in all other respects, and they will both be worthless after 10 years. Assume that gas prices will rise by the rate of inflation (that you calculated in part a. Further assume that all gas expenditures are incurred at the end of the year. If the nominal interest rate is 9% per year, which car should you purchase? Show all calculations and explain carefully.Calculate the inflation rate for 2007-2008 2008-2009 2014-2015 2015-2016If inflation has been 2% each year for the past 3 years, and over that time your salary has increased from $80,000 per year to $84,000 per year, then your real wage has Not changed Increased by more than nominal wage has increased. Increased by less than nominal wage has increased. Decreased
- You currently have $300 in the bank which pays a 5% pa interest rate. Apples currently cost $1 each at the shop and the inflation rate is 4% pa which is the expected growth rate in the apple price. All rates are given as effective annual rates. Which of the below statements is NOT correct? All answer options are rounded to 6 decimal places. Question 1 Select one: a. In 3 years the nominal apple price will be $1.029124. b. The real growth rate in the apple price is expected to be 0% pa. c. In 3 years your money in the bank will be worth $347.287501 in nominal terms. d. In 3 years your money in the bank will be worth 308.737324 apples. e. The real bank interest rate is 0.961539% pa. Provide accurate answer as soon as possible.Identify the cost of inflation described. The cost of wheat has gone up down to a drought, so local restaurants charge more for pasta they serve. Shoe-leather cost. Menu cost. Unit-of-account cost. This is not a cost of inflation.By adjusting the interest rate and changing the quarterly deposits required, can we adjust annual inflation?