Economics

Q1. Given that the value of CPI in 2018 is 247.59 and the CPI for 2019 is expected to be 250. 75, calculate the expected inflation for 2019.

Q2. Assume your annual income in 2017 was $75,000 and the CPI for 2017 was 245.12. If you expect your annual income to increase to $85,000 in 2018 and CPI is expected to be 247.59 in 2018, estimate your expected increase in real income between 2017 and 2018.

Q3. Explain why the positive growth rate of RGDP, which is already adjusted for inflation, doesn’t necessarily reflect the true economic well-being of the society as a whole.

Q4. Explain briefly why actual unemployment is never zero, even when the economy is considered to be in a state of full employment.

Q5. Why do economists and business investors expect inflation to accelerate when actual unemployment falls below the natural rate of unemployment (NAIRU)?

Q6. You buy a car with a 5% interest rate per year with five years to pay off the car loan. Suppose the expected inflation is an average of 1.5% per year over the next five years. Using the Fisher equation for the difference between the nominal interest rate and real interest rate, explain whether you are better off or whether your lender is better off when you purchase your car with a five-year loan with a 5% interest rate.

Q7. Critically, but very briefly, explain why the minimum RGDP growth rate needed to achieve full employment for the United States is constrained by 3%. Give numerical examples by using relevant equations and compare them with other countries’ positions.

Q8. Briefly explain why the shape of the SRAS curve is relatively flat during a severe recession and increasingly slopes upward as the economy reaches full employment and beyond.

Q9. Explain why the AD curve slopes downward.

Q10. What is the Keynesian multiplier and how does it expand the economy at the rate of the multiple of initial expenditure amount injected into the economy? Give a numerical example as part of your answer