Question

Wanda opens a retirement account and starts with a balance of $6,000. One year later she has $6,720 in the account. During the year, the consumer price index increased from 160 to 166.4.

The nominal interest rate is ______________ % and the real interest rate is ____________ %

Consider the following information about production in quarter 1 of 2019.

Firm T produces 600 tires at a cost of $28 each, and sells 580 tires to Firm B at a cost of $37 each.
Firm B produces 290 bicycles at a total of cost of $348 each, and sells 280 bicycles to consumers for $407 each.

In this simple economy, what is the value of inventory investment?

Bob sells his 4 year old carto his cousin Bill. This _____________ count in GDP.
Joy sells her 5 year old car to CarMax. This _____________ count in GDP.
Auto Nation sells used cars for 25% more than they pay for them. This ___________ count in GDP

Answer 1

The nominal and the real interest rate is "12%" and "8%". A further explanation is provided below.

Given:

Future worth,

= $6,720

Present worth,

= $6,000

→ The Nominal interest rate is:

= $(\frac{Future \ worth}{Present \ worth})^{1/years} -1$

= $(\frac{6720}{6000} )^1-1$

= $0.12\times 100$

= $12$ (%)

Now,

→ The Inflation rate will be:

= $\frac{166.4}{160}-1\times 100$

= $4$ (%)

hence,

→ The real interest rate will be:

= $Nominal \ rate - Inflation \ rate$

= $12-4$

= 18

Thus the above is the right solution.

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