8. Julia's publisher sends her a $15,000 check every year that her book is in print. Suppose Julia's book is in print for five years and the inflation rate during that period is (-2) percent.
A. What has happened to her nominal income from the book? Explain in 1-2 sentences, demonstrating you understand the term "nominal income." (4 points)
B. What has happened to Julia's real income from the book? Explain in 2-4 sentences, demonstrating you understand the term "real income." Note: there's not enough information to calculate precise changes; just discuss in terms of directions. (6 points).
C. In 4-5 sentences, explain what the term "deflation" means and why it is considered to be problematic. Support your answer with paraphrased evidence from the text AND assigned articles. (15 points)
9. (A) Calculate price index numbers for the following table, assuming year 3 is the base year, and put your results in the last column. (5 points)
(B) What does the price index tell us? Answer in 1-3 sentences. (5 points)
Year
Market Basket Outlay
Price Index
1
$170
2
180
3
200
4
200
5
224