The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction.Hailey divides all of her income between spending on paperbacks and lattes. In 2015, she earned an hourly wage of $28.00, the price of a paperbackwas $7.00, and the price of a latte was $4.00.Which of the following give the real value of a variable? Check all that apply.Hailey's wage is 7 lattes per hour in 2015.Hailey's wage is $28.00 per hour in 2015.The price of a paperback is 1.75 lattes in 2015.Which of the following give the nominal value of a variable? Check all that apply.Hailey's wage is $28.00 per hour in 2015.Hailey's wage is 4 paperbacks per hour in 2015.The price of a latte is $4.00 in 2015.Suppose that the Fed sharply increases the money supply between 2015 and 2020. In 2020, Hailey's wage has risen to $56.00 per hour. The price of apaperback is $14.00 and the price of a latte is $8.00.In 2020, the relative price of a paperback is,Between 2015 and 2020, the nominal value of Hailey's wageMonetary neutrality is the proposition that a change in the money supplyvariables., and the real value of her wagenominal variables andreal

The classical dichotomy refers to the separation of real and nominal variables.Real variables are…

Answered: The classical dichotomy is the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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On January 1, 2012, Albert invested $2,000 at 5 percent interest per year for three years. The CPI (times 100) on January 1, 2012, stood at 100. On January 1, 2013, the CPI was 106; on January 1, 2014, it was 112; and on January 1, 2015, the day Albert's investment matured, the CPI was 117. Find the real rate of interest earned by Albert in each of the three years and his total real return over the three-year period. Assume that interest earnings are reinvested each year and themselves earn interest. Hint: Calculate inflation and real interest for each year and then calculate it for the three years as a whole. Instructions: Enter your responses rounded to one decimal place. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Year 2012 2013 2014 Real rate of interest Total real rate of return: -1% % % %.
Using Table 1, calculate percent change in real (1988 = 100) aggregate away-from-home household %3! food expenditures from 1997 to 2019. Enter your answer as a percent rounded to the nearest one hundredth of a percent (i.e., two decimal places). Table 1. Population, CPI, Income, and Food Expenditure Data. Away-From- At-Home Home Total Disposable Household Household Household Personal Food Food Food Year Population Expenditures Expenditures Expenditures CPI Income millions (1988 = 100) billions, nominal. %3D 1997 273 135.7 6,161 354 265 619 1998 276 137.8 6,574 364 278 642 1999 279 140.8 6,890 386 292 678 2000 282 145.6 7,416 405 313 718 2001 285 149.7 7,767 423 326 749 2002 288 152.1 8,107 428 334 762 2003 290 155.5 8,484 444 355 799 2004 293 159.7 8,986 466 382 848 2005 296 165.1 9,386 491 407 898 2006 298 170.4 10,025 515 434 949 2007 301 175.3 10,515 543 461 1,004 2008 304 182.0 10,935 564 478 1,042 2009 307 181.3 10,907 537 476 1,013 2010 309 184.3 11,314 538 489 1,027 2011 312…
Consider a fictional price index, the College Student Price Index (CSPI), based on a typical college student’s annual purchases. Suppose the following table shows information on the market basket for the CSPI and the prices of each of the goods in 2017, 2018, and 2019. The cost of each item in the basket and the total cost of the basket are shown for 2017. Perform these same calculations for 2018 and 2019, and enter the results in the following table. **THE TABLE IS ATTACHED** Suppose the base year for this price index is 2017. In the last row of the table, calculate and enter the value of the CSPI for the remaining years. Between 2017 and 2018, the CSPI increased by_________%. Between 2018 and 2019, the CSPI increased by_________%. Which of the following, if true, would illustrate why price indexes such as the CSPI might overstate inflation in the cost of going to college? Check all that apply. As the price of textbooks increased, more and more students…
Consider a fictional price index, the College Student Price Index (CSPI), based on a typical college student’s annual purchases. Suppose the following table shows information on the market basket for the CSPI and the prices of each of the goods in 2017, 2018, and 2019. The cost of each item in the basket and the total cost of the basket are shown for 2017. Perform these same calculations for 2018 and 2019, and enter the results in the following table.
If there are only two goods, apples and bikes produced in the economy; in 2015 total production of apples was 1000 tones and price of apple is $2 per tone; total production of bikes was 100 units and price of bikes was $500 per unit. in 2016 total production of apples was 1500 tones and price of apple is $3 per tone; total production of bikes was 110 units and price of bikes was $600 per unit. According to the information above, please calculate the consumer price index for 2016. O a. 136,89 Ob. 133,12 Oc 135,58 Od. 134,34
Do you think a negative nominal interest rate can happen? What about a negative real interest rate? Explain.
What is the effect of the sources of bias on the CPI calculation? A. Changes in relative prices lead consumers to change the items they buy, and the CPI reflects this substitution. B. The new goods bias injects a downward bias into the CPI. C. When faced with higher prices, people use discount stores more frequently and convenience stores less frequently, but the CPI doesn't include this outlet substitution. D. When the quality of a good improves over time, the CPI doesn't include the portion of the price rise attributable to the higher quality in its calculation.
Tamika is lending Juan $1,000 for one year. The CPI is 1.60 at the time the loan is made, and they both expect it to be 1.68 in one year. If Tamika and Juan agree that Tamika should earn a 3 percent real return for the year, the nominal interest rate on this loan should be percent.
What is the difference between nominal and real variables? Give two examples of each.
Suppose consumer confidence falls. What happens to the nominal interest rate and income?

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