Question

In: Economics

The rate of inflation over the last two years has averaged 2% per year. At the...

The rate of inflation over the last two years has averaged 2% per year. At the same time, John feels like he is able to purchase fewer goods and services with his annual salary. Therefore:\

Both John’s nominal and real salaries must have declined

John must not have received any pay raise

John’s nominal salary must have declined

John’s real salary must have declined

29.

Under which of the following circumstances is inflation most costly to an individual?

Group of answer choices

The inflation rate has averaged 5% for each of the last five years and an individual has received a 6% pay raise for each of the last five years.

An individual's wage is indexed to the rate of inflation.

Joe is a minimum wage earner and the minimum wage has not changed for the last five years.

Joe has a contract at work that guarantees him a cost of living adjustment equal to the going rate of inflation. Last year inflation was 10%.

Solutions

Expert Solution

1. Ans - John’s real salary must have declined

Explanation:

Real GDP is use to measure the purchasing power so if John feels like he is able to purchase fewer goods and services with his annual salary, it means his real GDP has declined.

2. Ans - Joe is a minimum wage earner and the minimum wage has not changed for the last five years

Explanation:

All the other individual are either get the pay raise or their wages are indexed to the rate of inflation but Joe who is a minimum wage earner has not get anything to adjust the inflation so among all the circumstances  inflation is most costly to him.

Rahul Sunny answered 1 year ago
Next > < Previous

Related Solutions

The risk-free rate over the last ve years was 1% per year. The market return averaged...
The risk-free rate over the last ve years was 1% per year. The market return averaged 13% per year with a standard deviation of 20%. The Copper Fund had an alpha of 2.5% per year with a beta of 0.7 while the Gold Fund had an alpha of 3.6% with a beta of 1.4. The Sharpe ratios of the two funds were 0.48 and 0.39 respectively. Investors hold these mutual funds in conjunction with others to create a well-diversified portfolio...
Over the previous year, suppose the unemployment rate has averaged around 5%, while inflation has been...
Over the previous year, suppose the unemployment rate has averaged around 5%, while inflation has been around 2.5%. Recently, inflation started increasing, and currently stands at 4%, while unemployment has fallen to 3.5% over this same period. a) What sort of shock would generate these symptoms? Draw the AS/AD graph that shows the state of the economy before and after this shock. b) Briefly describe the two goals that the Federal Reserve is required to pursue with monetary policy. Given...
Over the last year the inflation rate was 3.8 percent and the interest rate on US...
Over the last year the inflation rate was 3.8 percent and the interest rate on US Treasury Bonds was slightly below 2 percent. As an investor in bonds a. what would you expect to happen to interest rates? b. using the three bond rules, in terms of prices, maturity, and coupon rates, what type of bonds should an investor purchase? Explain. c. Which bond is more price sensitive, a zero coupon 20 year to maturity government issued bond or a...
26. Suppose that over the last 30 years, company ABC has averaged a return of 10%....
26. Suppose that over the last 30 years, company ABC has averaged a return of 10%. Over the same period, the Treasury bond rate has averaged 3%. The current estimate of the Treasury bond rate is 5%. Using the historical approach, what is the estimate of ABC’s expected return. A. 13.0% B. 12.5% C. 12.0% D. 11.0% 27. Standard deviation measures: A. systematic risk. B. unsystematic risk. C. total risk. D. beta risk. 28. Investors can eliminate what type of...
Compute the annual inflation rate by using the monthly inflation rates over the last (available) twelve...
Compute the annual inflation rate by using the monthly inflation rates over the last (available) twelve months.  Include the effect of compounding.
Over the last 5 years, Kansas Whiskey has increased their production from 4,000 units per year...
Over the last 5 years, Kansas Whiskey has increased their production from 4,000 units per year to 6,000 units per year. Over that same time period its costs per unit (long-run ATC) has decreased from $8.50 per unit to $6 per unit. This means that Kansas Whiskey is experiencing a. Economies of Scale b. Constant Returns to Scale c. Diseconomies of Scale
Over the last 30 years, does the quantity theory explain inflation over the trend in Australia?
Over the last 30 years, does the quantity theory explain inflation over the trend in Australia?
Both China and India have averaged around 7% GDP growth rates over the last 5 years...
Both China and India have averaged around 7% GDP growth rates over the last 5 years while the US and Japan have averaged around 2%. The population growth rates for the US and China and Japan are all under 1% (.5% for China, .8% for the US, and −.1% for Japan) while India’s is 1.2% (also relatively modest). Discuss these facts in the context of a Solow-Swan growth model, clearly explaining your reasoning.
Both China and India have averaged around 7% GDP growth rates over the last 5 years...
Both China and India have averaged around 7% GDP growth rates over the last 5 years while the US and Japan have averaged around 2%. The population growth rates for the US and China and Japan are all under 1% (.5% for China, .8% for the US, and −.1% for Japan) while India’s is 1.2% (also relatively modest). Discuss these facts in the context of a Solow-Swan growth model, clearly explaining your reasoning.
Does the quantity theory explain inflation in Australia over the last 30 years?
Does the quantity theory explain inflation in Australia over the last 30 years?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT