Reference no: EM13698943
Assume that the inflation rates in 2010, 2011, and 2012 were 1%, 2%, and 3% respectively.
During the same periods, nominal interest rates were 5%, 5%, and 6%, respectively.
(a) What are the ex-post real interest rates in 2010, 2011, and 2012?
(b) Suppose expected inflation rate in 2011 is the ex-post inflation rate in 2010, and expected inflation rate in 2012 is the ex-post inflation rate in period 2011. What are the ex-ante real interest rates in 2011 and 2012?
(c) If someone lends in 2011, based on the ex-ante inflation expectation in part (b), is he better or worse off when the loan is repaid? Explain why.
|
What is the social surplus created by eradicating polio
: Suppose that the cost of eradicating polio from a society of 1,000 persons is $5 per person. Also suppose that only two persons in the society will benefit from that policy, and the benefit to each of those persons is $2,000. Then what is the social ..
|
|
Consider the market for carbonated water
: Consider the market for carbonated water and suppose that demand is given by D(p) = 100 – 5p There are only two firms producing carbonated water, each with the same constant unit cost c = 2.
|
|
Explain why there is a blurry line dividing objects
: Explain why there is a blurry line dividing objects that are “money” from those that are not. Give examples of some clear-out cases? And some borderline ones. Could the position of this blurry line change over time?
|
|
Double declining balance depreciation schedules
: Jack’s construction company is considering the purchase of new equipment at a cost of $10,500; with an estimates salvage value of $500 and projected useful life of 4 years. Determine the straight-line (SL), sum of year's- digit (soyd) and double decl..
|
|
What are the ex-post real interest rates
: Assume that the inflation rates in 2010, 2011, and 2012 were 1%, 2%, and 3% respectively. During the same periods, nominal interest rates were 5%, 5%, and 6%, respectively. What are the ex-post real interest rates in 2010, 2011, and 2012?
|
|
Profit-sharing royalty scheme with the stall holders
: Crepe Creations is considering franchising its unique brand of crepes to stall-holders on Hermoza Beach, which is five miles long. CC estimates that on an average day there are 1,000 sunbathers evenly spread along the beach and that each sunbather wi..
|
|
What first cost should be assigned to the existing system
: A material handling system was purchased 3 years ago for $120,537. Two years ago it required substantial upgrading at a cost of $14,340. It once again is requiring an upgrading cost of $24,925. Alternately, a new system can be purchased today at a co..
|
|
Why is the unrestricted entry of new firms to all markets
: Why is the unrestricted entry of new firms to all markets necessary to assure the efficient allocation of resources in the long run?
|
|
Model of the money supply under fractional-reserve banking
: To increase tax revenue, the US government in 1932 imposed a two-cent tax on checks written on deposits in bank accounts (In today’s dollars, this tax was about 25 cents per checks)
|