Calculate the rate of inflation between 2012 and 2019

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a. An office building is valued at $1 million in 2019, which is 20% greater than its value in 2012. Using prices in 2012 as the base year, know that prices in the economy have grown on average by 1.35 times between 2012 and 2019.

(i) If the value of the office building had risen at the same rate as average prices between 2012 and 2019, what would it be worth in 2019? Briefly explain your answer.

(ii) Without doing any calculations, but simply based on information in the question and your response in (i), would you be better off having bought this office building in 2012 or 2019? Briefly justify your answer.

(iii) Calculate the rate of inflation between 2012 and 2019.

Why might banks be reluctant to lend money if inflation in the economy tends to be higher than expected from time to time? Justify your answer(s).

Reference no: EM132413411

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