PS2 - Econ 3140 Fall 2009 Problem Set 2 Due Wednesday...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Econ 3140 Fall 2009 Problem Set 2 Due Wednesday September 16 (on lecture time) Reading assignment: Chapter 2.4, 2.5,3.1, 3.2 & 3.3 1. How does chain weighting lead to a di/erent measurement of real GDP than the meth- ods used by the BEA prior to 1996? What are the advantages of chain weighting? What are the disadvantages? 2. The consumer price index (CPI) was 180 for 2002 when using 1983 as the base year (1983 = 100). Now suppose we switch and use 2002 as the base year (2002 = 100). What is the CPI for 1983 with the new base year? 3. Question Four from Abel et.al., Chapter 2, analytical problems 4. Loretta agrees to lend Ted $500 ; 000 to buy computers for his consulting °rm. They agree to a nominal interest rate of 8% . Both expect the in±ation rate to be 2% . (a) Calculate the expected real interest rate. (b) If in±ation turns out to be 3% over the life of the loan, what is the real interest rate? Who gains from unexpectedly high in±ation, Loretta or Ted? (c) If in±ation turns out to be 1% over the life of the loan, what is the real interest rate? Who gains from
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern