mt12005 - Economics 202 Spring 2005 First Midterm Name: _...

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Economics 202 Name: _______________ Spring 2005 Professor Melick First Midterm 1. Given the information in the table below, calculate the average annual rate of inflation over the fifty-year period 1954 to 2004 as measured by both the Consumer Price Index from the Bureau of Labor Statistics and the Personal Consumption Expenditures Price Index from the Bureau of Economic Analysis. Year Consumer Price Index (1982-1984 = 100) Personal Consumption Expenditures Price Index (2000 = 100) 1954 26.9 18.585 2004 188.9 107.810 2. In a well-written paragraph, discuss whether or not you find the differences between the two rates of inflation from question (1) to be surprising.
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3. Suppose GDP in an economy amounts to 1000 in period 1 and that it is known with certainty that GDP will amount to 1050 in period 2. In this economy, the real interest rate is 5 percent and wealth (accumulated assets) amounts to 100 in period 1. The tax rate is 30 percent so government revenue amounts to 300 ( 3 . 0 1000 ). a) In a slight variation of the two period model presented in the textbook, suppose that consumption is a function of after-tax income, as well as the real interest rate and wealth. Suppose further, that consumers in this simple two period economy desire to equate the present
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This note was uploaded on 05/13/2010 for the course ECON 323 taught by Professor Jakes during the Spring '10 term at Alcorn State.

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mt12005 - Economics 202 Spring 2005 First Midterm Name: _...

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