Author Question: The Costs of InflationIf you want to make a 11% real return on a loan that you are planning to make ... (Read 55 times)

april 19 · **on:** Nov 23, 2022

Question 1

Using Price Indexes to Correct for Inflation

Year	Nominal Average Hourly Earnings	CPI
1	$12	100
2	13	107
3	18	113

Based on the data in the table, the rate of growth of the average price level from Year 2 to Year 3 is ________. (Round to the nearest tenth when appropriate.)
◦ 38.5%
◦ 5.3%
◦ 5.6%
◦ 10.6%

Question 2

The Costs of Inflation

If you want to make a 11% real return on a loan that you are planning to make and the expected inflation rate during the period of the loan is 6%, then you should charge a nominal interest rate of ________.
◦ -5%
◦ 11%
◦ 17%
◦ 5%

Marys · **Reply #1 on:** Nov 23, 2022

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