Question

QUESTION 4

1. The difference between nominal and real is

   		nominal is a number stated in dollars and real is stated with an index number.
   		real is measured in current dollars and nominal is measured in dollars of a given year.
   		real is a number stated in dollars and nominal is stated with an index number.
   		nominal is measured in current dollars and real is measured in dollars of a given year.

2 points   

QUESTION 5

1. In 1998 the price of gas was $0.99 per gallon and CPI was 160. Today the price of gas is $2.20 per gallon and CPI is 259.

   Round to two decimal places.

   What is the 1998 price of gas measured in todays dollars? $

   What is todays price of gas measured in 1998 dollars? $

8 points   

QUESTION 6

1. The real interest rate equals the

   		nominal interest rate divided by 100.
   		nominal interest rate minus the inflation rate.
   		nominal interest rate multiplied by 100.
   		nominal interest rate divided by the inflation rate and then multiplied by 100.

Answer 1

QUESTION 4

The difference between nominal and real is nominal is measured in current dollars and real is measured in dollars of a given year.

( We use the same concept to measure nominal GDP which is based on current prices and real GDP which is based on a base/given price)

QUESTION 5

Value of 2020 oil produced in 1998 = 1.35 dollars

Value of 1998 oil produced in 2020 = 1.65 dollars

The solution is given below ( Note value "in" the year is written, "of oil in the year" is given)

QUESTION 6

The real interest rate equals the nominal interest rate minus the inflation rate.

(In other words, A real interest rate is an interest rate adjusted to remove the effects of inflation which then shows the real cost of funds real yield to the borrower and lender respectively.)