Engineering Economy calculations that consider deflation use the same relations as those for inflation. True but not for personal use True but the effect of deflation uses a negative sign. False but only for personal use False but only for commercial use
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- A fixed-rate mortgage has the same interest rate over the life of the loan, whether the mortgage is for 15 or 30 years. By contrast, an adjustable-rate mortgage changes with market interest rates over the life of the mortgage. If inflation falls unexpectedly by 3, what would likely happen to a homeowner with an adjustable-rate mortgage?Inflation rates, like most statistics, are imperfect measures. Can you identify some ways that the inflation rate for fruit does not perfectly capture the rising price of fruit?Describe a situation, either a government policy situation, an economic problem, or a private sector situation, where using the GDP deflator to convert from nominal to real would be more appropriate than using the CPI.
- Construct the price index for a fruit basket in each year using 2003 as the base year.The index number representing the price level changes from 110 to 115 in one year and then from 115 to 120 the next year. Since the index number increases by five each year, is five inflation rate each year? Is the inflation rate the same each year? Explain your answer.Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time payment of 20,000. However, if the inflation rate is 6 per year, how much buying power will that 20,000 have when measured in todays dollars? Hint: Start by calculating the rise in the price level over the 16 years.
- In all of your previous problems, you examined trende that do not take inflation into account. Ba this extension, you will reproduce the analysis after adjusting the data for inflation. 11. Use the following web-site to convert the price of gasoline to inflated prices for the current year. Add these values to the table that follows. http://www.bls.govldata'inflation calculator.htm Gas Price per Gallen $1.30 $1.47 S1.14 $1.47 $1.59 $1.82 $2.32 $2.27 $3.05 S1.79 $2.73 $3.09 $3.40 Gas Price Adjasted for Inflation 2.21 2.41 Years since 2000 2 3. 237 2.47 2.14 3.22 4.15 2.44 3.62 4,03 4.71 7. 8. 10 11 12 *Whut you are going to do here is use the year 2000 as your baseline for all years. On the web- site, enter the price in the first field, always leave the second field 2000, and adjust "Has the same buying power as" to the ycar next to each price. When you click "Calculate," you will see the adjusted price. That is what you write in the last column of the table for each year. For example,…The Consumer Price Index (CPI) exhibits four known biases. Three of these biases occur, because the CPI is calculated based on a basket of goods year-to-year. This calculation to compare CPI values year-to-year and calculate the inflation rate. approach makes it Ofixed; more difficult O variable; more difficult O fixed; easier O variable; easier2019 2020Commodities Price Quantity Price QuantityA 3 30 5 25B 4 20 5 30C 20 18 25 25a) Using the data given above, compute the Nominal and Real GDP for 2019, and 2020. (The base year is 2019). b) Compute the inflation rate for the year 2020 by using the GDP deflator.
- The value of a price index in the base year is 0 100 200 The inflation rate The average cost of a market basket of goods. If your wage doubles at the same time as the consumer price index goes from 100 to 300, your real wage Doubles Falls Increases Stays the same Cannot be determinedQuestion 6 Inflation a. occurs when the economy becomes overheated. b. is a measure of how strong the economy is. c. is the increase in the price of a car. d. is a rise in the overall price level. Choose one of the following below that corresponds to the correct answer above. a Ob O c Od Question 7 t which can be approximated by the growth of gross domot standard of living in a countryThe table below represents the goods that are produced by Siri bread and water are used by the citizens of the city half of all plows are used by the city Council while the rest are used by citizens metal is used to produce plows and Nothing More when necessary use 2013 as the base year the typical consumer buys 10 bread 100 water and two plows.a. Calculate the inflation fir all adjacent years