27) Whielh Which of the following desecribes a situation in which the person is

Question

27) Whielh Which of the following desecribes a situation in which the person is A person who lends money during a period when inflation is retiree whose pension is adjusted for inflation A) A a) A person who borrows money during a period when inflation is D) A petson paid a fixed income during an inflationary period 28) level to pull inflation (Inflation caused by increase in demand) typically causes the price and GDP to-- in the short run. A) increasedecrease B) increase; D) decrease; increase eoninal intrest rate minus the expected rate of inflation is known as the A) discount rate B) real rate of interest C) real rate of interest D) prime lending rate E) federal funds rate 30) Suppose that the actual inflation rate was higher than the year. This would result in expected rate of inflation this A) gains for lenders at a fixed rate of interest B) losses for borrowers at a fixed rate of interest C) losses for both borrowers and lenders at a fixed rate of interest D) benefits for borrowers at a fixed rate of interest E) both A and B Use the information below for questions 31-33 Quantity in unit price in unit in $1 $1 $1 S1 $2 S3 Bar of soap 20 30 Pair of Socks 31) The CPI of the current Year is equal to A) CPI= 100 B) CPI- 233 C) CPI-322 D) CPI=-43 Assuming that the market basket in the table above is also that nation's production bash Answer the following two questions: 32) The real GDP in the current year is equal to A) S6 B) S60 C) $100 D) $140

Explanation / Answer

27. Ans: a person paid a fixed income during an inflationary period.

28. Ans: increase : increase

29. Ans: real rate of interest

30. Ans: benefits for borrowers at a fixed rate of interest.

Explanation:

When actual inflation rate is higher than was expected, the real interest rate is lower than expected. Because the real interest rate is lower than was expected, the lender loses and the borrower gains. In other words, the borrower is repaying the loan with dollars that are worth less than was expected.

31. Ans:

Explanation:

CPI of the current year = [{(10 * $1) + (20 * 2) + (30 * 3)} / {(10 * $1) + (20 * 1) + (30 * 1)}] * 100

                                     = (140 / 60) * 100

                                    = 233

33. Ans: $60

Explanation:

Real GDP in the current year = (10 * $1) + (20 * 1) + (30 * 1) = $60

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