EBK BRIEF PRINCIPLES OF MACROECONOMICS
7th Edition
ISBN: 9780100469884
Author: Mankiw
Publisher: YUZU
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Question
Chapter 6, Problem 9PA
Subpart (a):
To determine
Nominal interest rate, real interest rate and inflation.
Subpart (b):
To determine
Nominal interest rate, real interest rate and inflation.
Subpart (c):
To determine
Nominal interest rate, real interest rate and inflation.
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Which of the following is the positive impact of inflation?
A) Inflation causes the real value of saving for a saving person to eroded.
B) Inflation makes debtors pay less in real return.
C) Fixed-income people have the same income but a high cost of living.
D) lender will not have the option to earn interest.
If my nominal wages go up 5% this year and inflation is 2% this year, what happened?
a) All of the choices are correct.
b) I experience an increase in my both my nominal income and in my real income.
c) My nominal wages increased more than the increase in the overall price level.
d) My real wages increased by approximately 3%
Suppose you took out 20,000 in student loans at a fixed interest rate of 5%. Assume that after you graduate, inflation rises significantly as you are paying back your loans. Does this rise in inflation benefit you in paying back your student loans? Who is hurt more from unexpected higher inflation, a borrower or a lender ?
Chapter 6 Solutions
EBK BRIEF PRINCIPLES OF MACROECONOMICS
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- Inflation represents the rate of increase of the average price of goods. If inflation decreases from 10% to 5%, does the average price of goods decrease? Explain.arrow_forwardMark Lai, a student of agricultural science in the developing country Mikatra, notes that the demand for rice increased substantially over the last ten years. He attributes this to the substantial growth in population during this period. Although rice cultivation in Mikatra is still labor-intensive, Mark observes that the inflation-adjusted wages for farm workers in the rice industry have more or less remained constant during this period, even though the supply of rice increased. This was contrary to Mark's expectations as inflation in Mikatra during this period was not very high. Which of the following, if true, is most likely to explain this outcome? A.Rice and other cereals form a smaller proportion of the food budget of higher-income individuals. B.The government of another major rice-producing country, Langun, subsidizes its rice farmers to keep its prices competitive in the global market. C.The government of Mikatra has recently set a price floor in the wheat market. D.Following…arrow_forwardIf borrowers and lenders anticipate that the rate of inflation will be 5%, but instead it turns out to be 3%, which of the following is likely to occur? Select one: a. The real interest rate is higher than expected. b. Lenders wish that they had made fewer loans. c. Borrowers wish that they had borrowed more money. d. Insufficient loans will have been made by lenders to maintain profit levels.arrow_forward
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