The following table gives the average nominal interest rates on six-month Treasury bills spanning the years 1997 and 2001, which determined the nominal interest rate paid by the U.S. government when it issued debt in that time period. The table also gives the inflation rate for the years 1997 2001. (All rates rounded to the nearest 0.1 percent.) Year 1997 1998 1999 2000 2001 Nominal Interest Rate (Percent) 5.2 4.8 4.8 5.9 3.4 Inflation Rate (Percent) 2.3 1.5 2.2 3.4 2.8 Source: "FRED Economic Data Federal Reserve Bank of St. Louis, last modified September 23, 2015, accessed September 24, 2019, hep//fred.stiouisfed.org.

The following table gives the average nominal interest rates on six-month Treasury bills spanning the years 1997 and 2001, which determined the nominal interest rate paid by the U.S. government when it issued debt in that time period. The table also gives the inflation rate for the years 1997 2001. (All rates rounded to the nearest 0.1 percent.) Year 1997 1998 1999 2000 2001 Nominal Interest Rate (Percent) 5.2 4.8 4.8 5.9 3.4 Inflation Rate (Percent) 2.3 1.5 2.2 3.4 2.8 Source: "FRED Economic Data Federal Reserve Bank of St. Louis, last modified September 23, 2015, accessed September 24, 2019, hep//fred.stiouisfed.org.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

help
The real interest rate in Africa is 1.1%. In 2019, the inflation rate was 1.6%. The expected inflation rate in 2021 is 1.4%. Calculate by how many percentage points we expect the nominal interest rate to change between 2019 and 2021.
Consider the following hypothetical tax schedule, expressed in nominal terms, for the tax year 2021-22. Assuming the CPI is 100 in 2021-22 and 125 in 2022-23, but the government does not adjust the tax schedule for tax year 2022-23, what is the average tax rate in 2022-23 for a household earning $48,000 in 2021-22, assuming their nominal income goes up with inflation? 15% 10% 9.1% 8.6% 7.7%
Q7. Suppose that your annual income (nominal) in year 1 is $45,000, and in year 2 is $51,232. If the CPI in year 1 is 143.6, and in year 2 is 150.7, a) Has your real income increased, decreased, or remain unchanged? Explain your answer. b) What is the inflation rate between the two years?
Assume the expected rate of inflation is 3 percent per year. What nominal interest rate should you charge to receive a real interest rate of 2 percent per year?
Assume that Sarah agrees to lend $100 to Sam for one year. Sam agrees to pay Sarah $117 at the end of the year. If inflation over that one year is 8%, what real rate of interest does Sarah earn on her $100?
The monthly market basket for consumers consists of pizza, t-shirts, and rent. The table below shows market basket quantities and prices for the base year (Year 1) and in the following two years. Product Pizza T-Shirts Rent Base Year (Year 1) Quantity 10 3 1 The inflation rate between Year 1 and Year 2 is The inflation rate between Year 2 and Year 3 is Price in the Base Year $3.50 $10.00 $500.00 Price in Year 2 $4.38 $9.00 $550.00 Price in Year 3 $4.73 $10.50 $600.00 %. (Round both answers to one decimal place.) %.
Suppose a bank wants to earn a real rate of interest equal to 7.23% and they expect the rate of inflation to be 6.34%. At what interest rate will they set this loan to be? Answer this as a percentage and round your answer to two digits after the decimal without the percentage. ex. If you found the inflation rate to be 5.125%, answer 5.13.
Suppose that currently the consumer prices index (CPI) is 359.7 and that at the same time last year it was 343.5. If an index-linked pension was £503 per month this time last year, calculate how much it should be per month now. (Give your answer to the nearest pound. Do NOT include the '£' sign. Assume the pension is index linked using the CPI.) Answer:
Consider an economy where: The real rate of interest The nominal rate of interest 4.11% 7.09% Calculate the anticipated rate of inflation. % (Enter your response as a percentage rounded to two decimal places)
Assume the nominal rate of return is 8.63% and the real rate is 4.68%. Find the inflation rate of return using the exact formula.
The accompanying table provides the inflation rate in the year 2005 and the average inflation rate over the period 2006–2019 for eight different countries. Country Inflation rate in 2005 Average inflation rate in 2006–2019 Brazil 6.87% 5.47% Canada 2.2% 1.72% China 1.77 2.68 France 1.74 1.23 Indonesia 10.45 5.83 Japan −0.28 0.35 Turkey 8.18 9.53 United States 3.39 1.95 Data from: IMF. Given the expected relationship between average inflation and menu costs, rank the countries in descending order of menu costs using average inflation over the period 2006–2019. Rank the countries in order of inflation rates that most favoured borrowers with 10-year loans that were taken out in 2005. Assume that the loans were agreed upon with the expectation that the inflation rate for 2006 to 2019 would be the same as the inflation rate in 2005. Did borrowers who took out 10-year loans in Japan gain or lose overall versus lenders? Explain.