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What was the annual inflation rate

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Reference no: EM13936704

The table below shows the prices (P) and quantities (Q) of a typical consumption basket, which consists of only product X and Y, for a country in several years:

 

2000

2007

2008

Product

Q

P

P

P

X

5

$2

$3

$3

Y

10

$4

$4

$4.55

a. Using year 2000 as the base year, calculate the CPI in 2000, 2007 and 2008.

b. What was the annual inflation rate between year 2007 and 2008?

c.  A person took out a one-year loan of $550 from the bank in 2007 and repaid $594 in 2008. What was the annual nominal interest rate between 2007 and 2008? What was the annual real interest rate?

d. Was the one-year loan a good business for the bank or not? Explain.

Given the table above, calculate the unemployment rate.

Reference no: EM13936704

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