ECN 204 Lecture Notes - Gdp Deflator, United States Treasury Security, Corporate Bond

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24 Feb 2013

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Assignment one: suppose that the annual rates of growth of real gdp of econoland over a five-year period were as follows: 3 percent, 1 percent, -2 percent, 4 percent, and 5 percent. Mexico"s real gdp per person is growing at 7 percent per year, it will take about. Apply the rule of 70 to solve the following problem. Real gdp per person in mexico in 2005 was about ,000 per person, while it was about ,000 per person in canada. If real gdp per person in mexico grows at the rate of 5 percent per year, about how long will it take mexico"s real. Gdp per person to reach the level that canada was at in 2005? (hint: how many times would mexico"s 2005 real gdp per person have to double to reach. Using year 3 as the base year, calculate the price index for each year.

Related Questions

Suppose that natural real output in the country of Eudemonia grows at a steady rate of 3 percent per year. In the past, velocity has been approximately constant, and the Eudemonian central bank has maintained a target rate of growth of 4 percent per year for the money stock. What would be the resulting rate of inflation? Now suppose that the introduction of Internet banking allows people to make transactions online without holding large amounts of currency or bank balances. As Internet banking spreads, velocity begins to increase at a rate of 3 percent per year. What will happen to the rate of inflation if money growth is unchanged? How could the central bank react to the change in velocity if it pursued an NGDP target instead of a money stock target?

pinkbat229

QUESTION 31

Suppose that twenty-five years ago a country had nominal GDP of $1,800, a GDP deflator of 150, and a population of 100. Today it has nominal GDP of $2,800, a GDP deflator of 270, and population of 180. What happened to the real GDP per person?

It more than doubled

It increased, but it less than doubled

It was unchanged

It decreased

1 points

QUESTION 32

During a presidential campaign, the incumbent argues that he should be reelected because nominal GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period and that the GDP deflator increased by 6 percent during the past 4 years. You should conclude that real GDP per person

grew by 2%

grew by 6%

grew by 8%

grew by 12%

1 points

QUESTION 33

Suppose todayâs CPI is 134.85, and suppose one must spend $986 today to purchase the same basket of goods and services that could be bought for $680 in 1989. Then the CPI in 1989 was

24.27

60.68

93.00

195.53

1 points

QUESTION 34

If your firmâs production function has a decreasing returns to scale and you increase all your inputs by 60%, then your firm's output will

not change

increase, but by less than 60%

increase by 60%

increase by more than 60%

QUESTION 36

Suppose country's nominal GDP tripled, population grew by 40%, and prices doubles over the last 25 year. What happened to nominal GDP per person?

increased by 114%

increased by 93%

increased by 87%

decreased by 69%

1 points

QUESTION 37

A barber shop produces 288 haircuts a day. Each barber in the shop works 8 hours per day and produces the same number of haircuts per hour. If the shopâs productivity is 3 haircuts per hour of labor, then how many barbers does the shop employ?

None of the above is correct

1 points

QUESTION 38

If the nominal interest rate is 11% and the rate of inflation is 6%, then the real interest rate is

-5%

1.67%

11%

1 points

QUESTION 39

Last year real GDP in Greatland was 651 billion and the population was 2.4 million. The year before, real GDP was 460 billion and the population was 1.9 million. What was the growth rate of real GDP per person during the year?

12 percent

10 percent

4 percent

2 percent

1 points

QUESTION 40

If real GDP increases by 40% and the GDP deflator decreases by 10%, then nominal GDP increases by

40%

30%

26%

-10%

Suppose I borrow $200,000 for one year at a fixed nominal interest rate of 7 percent.

(a) What is my nominal repayment next year?

(b) Suppose that at the time the loan was made, both the lender and I believed that the (ex-ante) rel interest rate on the loan would be two percent. Suppose the actual inflation rate over the life of the loan turns out to be 4 percent. What is the ex-post real interest rate? Does the inflation rate help me at the expense of the lender, or help the lender at my expense?

(d) Given that the lender and I agreed that the ex-ante real interest rate should be 2 percent, what nominal interest rate would I have been charged if the lender and I had expected inflation over the life of the loan to be 10 percent? 3 percent? 0 percent?

(e) Inflation increased enexpectedly during the 1970s. Explain why this helped someone who bought a house using a 30-year mortgage with fixed nominal interest rates in 1965, but not someone who bought a house using a 30-year mortgage with a fixed nominal interest rate in 1980.

yellowprairie-dog173

ECN 204 Lecture Notes - Gdp Deflator, United States Treasury Security, Corporate Bond

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