In year 1 the cpi is 175 and in year 2 the cpi is 270

• Test Prep
• 25

This preview shows page 10 - 13 out of 25 pages.

26. In year 1 the CPI is 175, and in year 2 the CPI is 270. From year 1 to year 2, Martha's salary rises from \$50,000 to \$60,000, and Chiang's salary rises from \$75,000 to \$90,000. Who is "more than keeping up with inflation"?a. Marthab. Chiangc.both Martha and Chiangd.neither Martha nor Chiang
27.You borrow \$10,000 today at a nominal rate of 5 percent; inflation for the past 10 years has been exactly 2 percent. Today, inflation instantly rises to 4 percent and stays that way for the duration of your loan. Based on the above information and all else being equal, today
e. both you and the lender are better off because real rates fall wheninflation rises.YearCPI199980200087200110520021122003108200411728.As presented in the table, the rate of inflation from 1999–2000 (i.e., during the year 2000) is
29. Let’s say a bottle of Dr. Wells soda (an actual sof drink still available but hard to obtain) cost \$0.15 in 1970. If the consumer price index (CPI) in 1970 was 37.8 and the CPI in 2019 is 240, then the price of Dr. Wells soda in 2019dollars would be (rounded to the nearest penny)
30.Assume tuition and fees at North Carolina State University cost \$5,000 in 2004 and \$8,500 in 2012. If the price index was 195 in 2004 and 250 in 2012, then we could saya. tuition has increased more slowly than inflation.b. tuition has increased more rapidly than inflation.c. tuition has increased at about the same rate as inflation.d. nominal tuition has decreased.e. tuition suffers from money illusion due to inflation.
31. When computing economic growth, changes in nominal gross domestic product (GDP) must be adjusted to reflect population growth because