Exam #1 Practice Problems

# Exam #1 Practice Problems - how much did the price level...

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Macro Recitation IC-3 Year Price of Coffee Quantity of Coffee Price of Red Bull Quantity of Red Bull GDP Real GDP GDP Deflator CPI 2000 \$2.00 10 \$1.00 5 2001 \$2.50 10 \$1.00 7 2002 \$3.00 12 \$1.25 8 Above is the price and quantity for all the goods produced and consumed in The People's Republic of Stimulus. Assume the year 2000 is used to fix the basket of goods for the CPI. Fill in the blanks and calculate inflation using both the CPI and the GDP deflator. Suppose minimum wage in TPRS is \$5.00/hour in the year 2000 and is raised to \$7.00/hour in the year 2002. What is the percentage increase in the minimum wage? By

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Unformatted text preview: how much did the price level increase over these years? Are the minimum wage workers better off in 2002 than they were in 2000 (according to your estimation)? Macro Recitation IC-3 Now inflate the 2000 minimum wage to 2002 prices. Does this imply the same conclusion? Deflate the 2002 minimum wage to 2000 prices. Does this imply the same conclusion? Suppose you borrow a large sum of money in 2001 to be repaid in 2002 at an interest rate of 10% which, at the time, seems like a lot but you really need the money. What is the real interest rate that you'll have to pay?...
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Exam #1 Practice Problems - how much did the price level...

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