PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 6, Problem 6.5CC
To determine

Compare the bond’s real earning relative to real salaries.

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Michael Jordan Earned $30,100,000 playing for the Chicago Bulls in 1997. In 1997 the CPI was equal to 1.60. In 2020 LeBron James earned $37,400,000 playing for the Los Angeles Lakers. The CPI in 2020 is equal to 2.58. Calculate the real wage for Micheal Jordan in 1997 and Lebron James in 2020. Please enter your answers as numeric answers rounded to the nearest dollar with no decimals (ie. 15,553,342 or $10,432,675 not $15,553,341.73 or $10,432,675.2). Because these will be large numbers it is a good idea to use commas to separate millions, thousands, and hundreds. What was the real wage for Michael Jordan in 1997? What is the real wage for LeBron James in 2020?
Frank agrees to lend his friend Sammy $1000 for one year so that Sammy can buy a new computer. Suppose at the beginning of the loan, the CPI was 2.25. At the end of the loan, when Franki was repaid, the CPI was 2.3. What nominal rate should Frank have charged if he wanted to receive a 0% real return? a) 3.1% b) 2.2% c) 1.6%
The CPI’s basket of goods includes potato chips, over half of which are made from potatoes grown in Idaho. Wildfires this summer destroyed acres of potato crops in Idaho, causing a spike in the price of potatoes, and there was a 30% increase in the price of potato chips. As a result, the CPI calculation showed an increase of 2% in the Fall of this year versus last year. Please explain if this 2% increase is reflective of the overall price level, and if not, why?
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