You deposit 2000 in a savings account and a year later you h

You deposit $2,000 in a savings account, and a year later you have $2,100. Meanwhile, the consumer price index rises from 200 to 204. percent. ercent, and the real interest rate is p In this case, the nominal interest rate isp 0 1,5 O 3, 5 0 5,1 O 5, 3

Solution

Question 1) Your amount deposited in the account raises from 2000 to 2100 so that there is an interest of 100. The nominal interest rate is 100/2000 = 5%. Inflation rate is (204 - 200)*100/200 = 2%. Hence nominal interest rate is 5% and inflation rate is 2%. So real interest rate is 5% - 2% = 3%. Correct choice is (5, 3).

Question 2) Labor supply is w = 20 + L and demand curve is 200 - 4L. Find the total cost function which is wL or 20L + L^2. Then the marginal cost function is 20 + 2L. This implies the number of workers hired will be

20 + 2L = 200 - 4L

6L = 180

L* = 30 and wage rate w (from labor supply) is = 20 + 30 = $50.

Question 3 Simple interest is calculated as Amount x rate of interest x time period.

Here time period is computed from 1 August 2008 to 1 November 2012, so count the months from August 2008 to October 2012. This makes T = 51 months

SI = 15000 x 15% x 51/12 = 9562.5

Correct option is 9562.5