Refer to Table 9-12. Consider a simple economy that produces only ...

[cmoore54]

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]

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.

[cmoore54]

Excellent

[ecabral0]

Gracias!