5. Interest, inflation, and purchasing powerSuppose Amy is a cinephile and buys only movie tickets. Amy deposits $2,000 in a bank account that pays an annual nominal interest rate of 5%.Assume this interest rate is fixed-that is, it won't change over time. At the time of her deposit, a movie ticket is priced at $20.00.Initially, the purchasing power of Amy's $2,000 deposit ismovie tickets.For each of the annual inflation rates given in the following table, first determine the new price of a movie ticket, assuming it rises at the rate ofinflation. Then enter the corresponding purchasing power of Amy's deposit after one year in the first row of the table for each inflation rate. Finally,enter the value for the real interest rate at each of the given inflation rates.Hint: Round your answers in the first row down to the nearest movie ticket. For example, if you find that the deposit will cover 20.7 movie tickets,you would round the purchasing power down to 20 movie tickets under the assumption that Amy will not buy seven-tenths of a movie ticket.Number of Tickets Amy Can Purchase after One YearReal Interest Rate0%Annual Inflation Rate5%10%When the rate of inflation is less than the interest rate on Amy's deposit, the purchasing power of her depositof the year.over the course

Suppose Amy only buys movie tickets. Amy deposits $2000 in a bank account that pays an annual…

Suppose Amy is a cinephile and buys only movie tickets. Amy deposits $2,000 in a bank account that pays an annual nominal interest rate of 5%. Assume this interest rate is fixed-that is, it won't change over time. At the time of her deposit, a movie ticket is priced at $20.00. Initially, the purchasing power of Amy's $2,000 deposit is movie tickets.

Suppose Amy is a cinephile and buys only movie tickets. Amy deposits $2,000 in a bank account that pays an annual nominal interest rate of 5%. Assume this interest rate is fixed-that is, it won't change over time. At the time of her deposit, a movie ticket is priced at $20.00. Initially, the purchasing power of Amy's $2,000 deposit is movie tickets.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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