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- Question 7 15.0% 14.0% 13.0% 12.0% 11.0% .10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Inflation Rate (n) down to 0 decreases to 5.04 1,000 2,000 10.04 3,000 4,000 5,000 Consider the graph above. It is also in the files folder under the name Short Run and the Long Run. The graph pertains to a hypothetical country. The central bank in this country (also called the Fed) follows an inflation targeting policy. The current target inflation rate in 8 percent (I know, it is too high. We will deal with this problem later after appointing a new chairperson for the Fed). The natural rate of unemployment is 5 percent and Okun's alpha is 8. 7000.00 LRAS Suppose that consumer confidence in the economy declines and as a result AD decreases by 3,000 units. This reduction in demand causes the inflation rate to slow 7.00 percent in the short run. In the short run, the real GDP percent. AD Real GDP (Y) SRAS 6,000 7,000 8,000 9,000 10,000 3 11,000 12,000 13,000 14,000 15,000 16.000 17,000…15.0% 14.0% 13.0% 12.0% 11.0% . 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Inflation Rate (n) 0 1,000 2,000 3,000 000't 5,000 6,000 000'2 8,000 9,000 000'0 LRAS 3 11,000 12,000 13,000 Real GDP (Y) This policy causes the inflation rate to drop to 14,000 9 AD SRAS 15,000 16,000 17,000 18,000 19,000 20,000 Short Run and Consider the graph above. It is also in the files folder under the name the Long Run. The graph pertains to a hypothetical country. The central bank in this country (also called the Fed) follows an inflation targeting policy. The current target inflation rate in 8 percent. The natural rate of unemployment is 5 percent and Okun's alpha is 8. Finally, the president of the country appoints a new chairperson for the central band and the chair decides to bring the runaway inflation under control (as the U.S. FED did in 1980). The new chair realizes that 8 percent inflation target is way too high. So, s/he decides to reduce the long-term target inflation rate to 2…MEEN1C | CLO 1 Prices of gasoline in the United States are forecast to increase by 7% in 2030. If the current average prices of gasoline in the United States stand at $3 per gallon, in 2020, What would be the average annual inflation rate over the forecast period. O The average annual rate of increase in the price of gasoline is 10% O The average annual rate of increase in the price of gasoline is 0.68% O The average annual rate of increase in the price of gasoline is 96.00% O The average annual rate of increase in the price of gasoline is 1.10%
- The accompanying table shows a utility company's cost to supply a fixedamount of power to a new housing development; the indices are specific to the utility industry. Assume that year 0 is the base period. Determine the specific inflation for each period and calculate the average inflation rate over the three year period. Year cost 0 $624.000 1 $638.400 2 $677,000 3 $729,500Table 2 Price per Unit in 2005 $2.00 $2.00 Units Purchased 2007 2008 Blueberries 9007 $2.10 $2.40 $2.50 $3.00 %243.50 $4.00 8. Pincapples Cheese 007$ $42.50 $3.00 $2.50 7. Refer to Table 2. The lowest inflation rate is between the years 2005 and 2006. cannot be determined from the given information 2006 and 2007. 2007 and 2008.If the Consumer Price Index (CPI) for one year was 150 and for the next year it was 157.5, the inflation rate from one year to the next is % 6.5% 5 5.0% 7.5% O 6.0% 16 < 4- 6 f7 4+ & 7 hp fg KAA 8 fg DII 9 f10 W DDI
- What is the month-over-month rate of inflation in May? If applicable, April is the reference period, round to two decimal places, and omit dollar or percentage signs from your answer. Month QA PA QB PB Qc Pc April 4 $0.63 May 4 $0.58 June 4 $0.64 444 $0.55 10 $0.62 $0.74 10 $0.72 4 $0.67 10 $0.78X₁ 4) If the effective annual interest rate is 9% per year and inflation is 3.8% per year what is the true annual interest rate? annual interest rate = effm = (1 + 0.091) nomiral= 0.7207 12 = 8.6484- anal interest rate= 13,8\8,6484 = 12.4481, nomiral tinflation = 0.007 207 ~ 0,7207 1 monthlyThe accompanying table shows a utility company's cost to supply a fixedamount of power to a new housing development; the indices are specific to the utility industry. Assume that year 0 is the base period. Determine the specific inflation for each period and calculate the average inflation rate over the threeyear period. Year Cost 0 $624,0001 $638,4002 $677,0003 $729,500
- ed Question 10 Inflation Rate (n) 15.0% 14.0% 13.0% 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1,000 2,000 3,000 000't 4,000 000 5 5,000 0003 6,000 7,000 8,000 000'60 10,000 LRAS Real GDP (Y) This policy causes the inflation rate to drop to AD 12,000 3 11,000 13,000 14,000 15,000 SRAS 16,000 Consider the graph above. It is also in the files folder under the name Short Run and the Long Run. The graph pertains to a hypothetical country. The central bank in this country (also called the Fed) follows an inflation targeting policy. The current target inflation rate in 8 percent. The natural rate of unemployment is 5 percent and Okun's alpha is 8. 17,000 18,000 9,000 20,000 Finally, the president of the country appoints a new chairperson for the central band and the chair decides to bring the runaway inflation under control (as the U.S. FED did in 1980). The new chair realizes that 8 percent inflation target is way too high. So, s/he decides to reduce the long-term…write on paper 1- The current gasoline price is $4.50 per gallon, and it is projected to increase by 5% the next year, 7% the following year, and 8% the third year. What is the average inflation rate for the projected gasoline price for the next three years?Question 11 Given the following numbers for this economy. What is the average annual inflation rate between base year and year 4 as per the CPI method? Base year Year + 5 Year + 4 Basket Quantities Price Price Price Product A 1 220 250 290 Product B 70 75 85 Product C 20 15 15 14 Product D 20 30 31 33 Product E 100 5 5.2 5.3 4.44% (B) 18.44% c) 1.11% (D) 9.17% E) 4.53% O © © © ©