ECO403 Current Midterm Paper Fall 2013 shared by Nomi Gill File 3

on December 29, 2013 at 4:36pm

 here is my today paper 

f the CPI for the year 1997 is 280.8 and CPI for the year 1998 is 301.87 then what will be the inflation rate for year 1998? 3

CPI in 1997 = 280.8

CPI in 1998 = 301.87

INFLATION RATE in 2008 = (301.87 – 280.8 / 280.8) *100

INFLATION RATE in 2008  = 7.50 %

n a hypothetical economy, people expect inflation to be 2% and desired real interest rate is 5%. Calculate the nominal interest rate in this economy.3

Inflation rate = 2%

Real interest rate = 5%

Nominal interest rate =?

Nominal interest rate = real interest rate + inflation rate

Nominal interest rate = 5% + 2% = 7%

Inflation rate = 2%

Real interest rate = 5%

Nominal interest rate =?

Nominal interest rate = real interest rate + inflation rate

Nominal interest rate = 5% + 2% = 7%

Explain the effect of an increase in unemployment benefits on the unemployment rate and waiting time. 3

 When there are enough jobs available in the market, people left their current jobs due to wage rigidity and job search.  The worker receives unemployment insurance the part of worker’s wages for a limited period of time he is jobless. Because of that worker become sluggish in finding new job as soon as possible. UI provides protection to unemployed and increases the employment rate