Questions 01.05.2020

1. If the price of imported French wine rises, is the con- sumer price index or the GDP deflator affected more? Why?

2. Over a long period of time, the price of a candy bar rose from $0.20 to$1.20. Over the same period, the consumer price index rose from 150 to 300. Adjusted for overall inflation, how much did the price of the candy bar change?

3. Explain the meaning of nominal interest rate and real interest rate. How are they related?