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Purchasing power in terms of carrots rise or fall

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In the Kingdom of Arendelle, a bag of carrots cost $1.20 in November 2013 and $2 in November 2019. The average wage in the Kingdom was $8 per hour in November 2013 and $12 in November 2019.

a. By what percentage did the price of carrots rise during this 6 year period? Please show your calculations and round your answer to the nearest whole percentage point if necessary.

b. By what percentage did the wage rise during this 6 year period? Please show your calculations and round your answer to the nearest whole percentage point if necessary.

c. In 2013, how many minutes does Kristoff have to work to earn enough to buy a bag of carrots for his reindeer friend Sven? How about in 2019? Please show your calculations and round your answer to the nearest minute if necessary.

d. Did Kristoff's purchasing power in terms of carrots rise or fall? Explain briefly.

e. Suppose that in 2013 Kristoff borrowed $1,000 from the Royal Bank of Arendelle to purchase a sleigh for his ice business, and he paid off the loan in 2019. The payments he made (principal + interest) to the bank during this period total $1,800. What is the nominal rate of interest he paid on this loan over this 6 year period? Assuming that carrot price increase reflects the increase in the general price level in Arendelle, what is the real rate of interest Kristoff paid on his loan over this 6 year period? Please show your calculations and round your answers to the nearest whole percentage point if necessary.

Reference no: EM132471620

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