Question 4: Calculate Real Interest rates from the following data taking 2010 as the base year
CPI basket
Item
Quantity
Price (2010)
Price (2011)
Apples
200
$1 each
$1.3 each
Bread
100
$3 each
$3.1 each
The nominal rate of interest for the year 2011 was 18%.
Question 4: Calculate Real Interest rates from the following data taking 2010 as the base year
CPI basket
|
Item |
Quantity |
Price (2010) |
Price (2011) |
|
Apples |
200 |
$1 each |
$1.3 each |
|
Bread |
100 |
$3 each |
$3.1 each |
The nominal rate of interest for the year 2011 was 18%.
Related textbook solutions
Related questions
Real versus nominal GDP
Consider a simple economy that produces two goods: apples and oranges. The following table shows the prices and quantities for the goods over a three-year period.
| Year |
Apples
|
Oranges
|
||
|---|---|---|---|---|
| Price | Quantity | Price | Quantity | |
| (Dollars per apple) | (Number of apples) | (Dollars per orange) | (Number of oranges) | |
| 2010 | 1 | 120 | 1 | 195 |
| 2011 | 2 | 130 | 4 | 195 |
| 2012 | 4 | 130 | 4 | 145 |
A. Use the information from the previous table to fill in the following table.
| Year | Nominal GDP | Real GDP | GDP Deflator |
|---|---|---|---|
| (Dollars) | (Base year 2010, Dollars) | ||
| 2010 | |||
| 2011 | |||
| 2012 |
B. From 2011 to 2012, change in nominal GDP is __________, and real GDP is ________.
C. The inflation rate in 2012 was ____________.
D. Why is real GDP a more accurate measure of an economy's production than nominal GDP?
a. Real GDP does not include the value of intermediate goods and services, but nominal GDP does.
b. Real GDP includes the value of exports, but nominal GDP does not.
c. Real GDP is not influenced by price changes, but nominal GDP is.
