The table below shows the prices (P) and quantities (Q) of a typical consumption basket, which consists of only product X and Y, for a country in several years:
|
|
2000
|
2007
|
2008
|
|
Product
|
Q
|
P
|
P
|
P
|
|
X
|
5
|
$2
|
$3
|
$3
|
|
Y
|
10
|
$4
|
$4
|
$4.55
|
a. Using year 2000 as the base year, calculate the CPI in 2000, 2007 and 2008.
b. What was the annual inflation rate between year 2007 and 2008?
c. A person took out a one-year loan of $550 from the bank in 2007 and repaid $594 in 2008. What was the annual nominal interest rate between 2007 and 2008? What was the annual real interest rate?
d. Was the one-year loan a good business for the bank or not? Explain.
Given the table above, calculate the unemployment rate.