CostofLiving.pptVIP

Example You borrowed $1,000 for one year. Nominal interest rate was 15%. During the year inflation was 10%. Real interest rate = Nominal interest rate – Inflation = 15% - 10% = 5% Discussion question 1 Compute how much each of the following is worth in terms of today’s dollars using 177 as the price index for today. a. In 1926 the CPI was 17.7 and the price of a movie ticket was $0.25 b. In 1932 the CPI was 13.1 and a cook earned $15.00 a week c. In 1943 the CPI was 17.4 and a gallon of gas cost $0.19 Discussion Question 2 In the country of Shem, the CPI is calculated using a market bask