Author Question: Refer to Table 9-12. Consider a simple economy that produces only three products: burritos, ... (Read 69 times)

cmoore54 · **on:** Jun 29, 2018

Refer to Table 9-12. Consider a simple economy that produces only three products: burritos, flashlights, and golf balls. Use the information in the table to calculate the inflation rate for 2016, as measured by the consumer price index.

What will be an ideal response?

Question 2

When economists say that mortgages are securitized what do they mean by this description?

What will be an ideal response?

jxjsniuniu · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Total expenditures for 2001 = (10 1.00 ) + (15 5.00 ) + (8 2.00 ) = 101.00.
Total expenditures for 2015 = (10 1.50 ) + (15 7.00 ) + (8 3.00 ) = 144.00.
Total expenditures for 2016 = (10 1.75 ) + (15 6.75 ) + (8 3.50 ) = 146.75.

The CPI for 2015 = (144.00/101.00 ) 100 = 142.57.
The CPI for 2016 = (146.75/101.00 ) 100 = 145.30.
So, the inflation rate for 2016 = ((145.30 142.57 )/142.57 ) 100) =1.9.

Answer to Question 2

It means that the mortgage documents are pooled and then mortgage-backed securities are sold to investors who want to take different degrees of risk.