Macroeconomics Exam 2 Study Guide

If nominal GDP is $ 5 trillion and real GDP is $ 4 trillion , the GDP deflator is

12.5 . 80 . 125 . 800 . 125 .

Last year real GDP per person in the imaginary nation of Olympus was $ 4,260 . The year before it was $ 4,100 . By about what percentage did real GDP per person grow during the period ?

16 percent 0.04 percent 4 percent 1 percent 4 percent

Refer to Table 24-1 . If Year 1 is the base year , then the inflation rate in Year 2 was

2.35 percent . -4.85 percent . 1.15 percent . -2.35 percent . -2.35 percent .

Consider the following data for Tyrovia , a country that produces only two products : guns and butter . Real GDP for Tyrovia for 2018 using 2009 as the base year equals

$ 1,140 . $ 880 . $ 690 . $ 560 . $ 690 .

Based on the table above , what is disposable personal income for this economy ?

$ 1,530 billion $ 2,030 billion $ 2,450 billion $ 5,130 billion $ 1,530 billion

Based on the table above , what is personal income for this economy ?

$ 1,950 billion $ 2,030 billion $ 2,450 billion $ 5,130 billion $ 2,030 billion

Based on the table above , what is national income for this economy ?

$ 1,950 billion $ 2,250 billion $ 2,950 billion $ 3,550 billion $ 2,950 billion

Consider the data above ( in billions of dollars ) for an economy : Gross domestic product ( in billions of dollars ) for this economy equals

$ 2,200 . $ 1,600 . $ 1,400 . $ 1,200 . $ 1,200 .

Refer to Table 24.1 . The cost of the basket in Year 2 was

$ 226 . $ 166 . $ 106 . $ 35 . $ 166 .

Mia Denton was an accountant in 1943 and earned $ 21,000 that year . Her son is an accountant too and he earned $ 270,000 this year . Suppose the price index was 18.3 in 1943 and 20.2 in the current year . Mia's 1943 income in current year dollars is

$ 39,900 . $ 424,200 . $ 23,180 . $ 298,033 . $ 23,180 .

If the nominal interest rate is 5 percent and the real interest rate is 7 percent , then the inflation rate is

-2 percent . 0.4 percent . 2 percent . 12 percent . -2 percent .

If the GDP deflator rises from 185 to 190 , what is the rate of inflation between the two years ?

270 % 50 % 5 % 2.7 % 2.7 %

Suppose that a very simple economy only produces four goods and services : sweatshirts , dental examinations , coffee drinks , and coffee beans . Assume that all the coffee beans in this economy are used in the production of coffee drinks . What is GDP using the information in the attached table ?

3,090 units $ 7,250 $ 8,750 $ 9,750 $ 8,750

The price index was 105 in Year 1 and 111 in Year 2. What was the inflation rate ?

5.7 percent 0.057 percent -5.7 percent 105.7 percent 5.7 percent

Refer to Table 24-1 . If Year 1 is the base year , then the CPI for Year 2 was

79.42 . 110.40 . 97.65 . 90.01 . 97.65 .

Suppose a basket of goods and services has been selected to calculate the CPI and Year 1 has been selected as the base year . In Year 1 , the basket's cost was $ 50 ; in Year 2 , the basket's cost was $ 52 ; and in Year 3 , the basket's cost was $ 55 . The value of the CPI in Year 3 was

90.9 . 104.0 . 105.0 . 110.0 . 110.0 .

What basket of goods and services is used to construct the CPI ?

A random sample of all goods and services produced in the economy The goods and services that are typically bought by consumers as determined by government surveys Only food , clothing , transportation , entertainment , and education The least expensive and the most expensive goods and services in each major category of consumer expenditures The goods and services that are typically bought by consumers as determined by government surveys

What basket of goods and services is used to construct the CPI ?

A random sample of all goods and services produced in the economy . The goods and services that are typically brought by consumers as determined by government surveys . Only food , clothing , transportation , entertainment , and education . The least expensive and the most expensive goods and services in each major category of consumer expenditures . The goods and services that are typically brought by consumers as determined by government surveys .

The CPI is a measure of the overall cost of the goods and services bought by

A typical consumer , and the CPI is computed and reported by the Department of the Treasury . Typical consumers and typical business firms , and the CPI is computed and reported by the Department of the Treasury . A typical consumer , and the CPI is computed and reported by the Bureau of Labor Statistics . Typical consumers and typical business firms , and the CPI is computed and reported by the Bureau of Labor Statistics . A typical consumer , and the CPI is computed and reported by the Bureau of Labor Statistics .

Suppose that in 2018 , all prices in the economy double and that all wages and salaries also double.In 2018 you

Are better off than you were in 2017 as your salary is higher than it was in 2017 and you can now buy more goods and services . Cannot determine whether you are better off or worse off than you were in 2017 , because the purchasing power of your salary cannot be determined . Are no better off or worse off than you were in 2017 as the purchasing power of your salary has remained the same . Are worse off than you were in 2017 as you can no longer afford to buy as many goods and services . Are no better off or worse off than you were in 2017 as the purchasing power of your salary has remained the same .

A country with a relatively low level of real GDP per person is considering adopting The second is to restrict foreign portfolio investment . Which of these policies do two policies to promote economic growth . The first is to decrease barriers to trade . most economists say promote growth ?

Both the first and the second The first but not the second The second but not the first Neither the first nor the second The first but not the second

Country Y has a population of 1,500 , of whom 375 work 7 hours a day to make 128,000 final goods . Country Z has a population of 2,200 , of whom 880 work 5 hours a day to make 384,000 final goods . Which of the following is true ?

Country Y has higher productivity and higher real GDP per person than country Z. Country Y has lower productivity but higher real GDP per person than country Z. Country Y has higher productivity but lower real GDP per person than country Z. Country Y has lower productivity and lower real GDP per person than country Z. Country Y has lower productivity and lower real GDP per person than country Z.

Which of the following countries benefited significantly from the catch - up effect in the last half of the twentieth century ?

Ethiopia The United States Canada South Korea South Korea

Because every transaction has a buyer and a seller ,

GDP is more closely associated with an economy's income than it is with an economy's expenditure . every transaction contributes equally to an economy's income and to its expenditure . the number of firms must be equal to the number of households in a simple circular flow diagram . firms ' profits are necessarily zero in a simple circular - flow diagram . every transaction contributes equally to an economy's income and to its expenditure .

Many things that society values , such as good health , high - quality education , enjoyable recreation opportunities , and desirable moral attributes of the population , are not measured as part of GDP . It follows that

GDP is still a useful measure of society's welfare because it measures a nation's ability to purchase the inputs that can be used to help produce the things that contribute to welfare . GDP is not a useful measure of society's welfare . GDP is still a useful measure of society's welfare because providing these other attributes is the responsibility of government . GDP is still the best measure of society's welfare because these other values cannot actually be measured . GDP is still a useful measure of society's welfare because it measures a nation's ability to purchase the inputs that can be used to help produce the things that contribute to welfare .

Suppose that in 2018 , the producer price index increases by 1.5 percent . As a result , economists most likely will predict that

GDP will increase in 2019 . The producer price index will increase by more than 1.5 percent in 2019 . Interest rates will decrease in the future . The consumer price index will increase in the future . The consumer price index will increase in the future .

For any given year , the CPI is the price of the basket of goods and services in the

Given year divided by the price of the basket in the base year , then multiplied by 100 . Given year divided by the price of the basket in the previous year , then multiplied by 100 . Base year divided by the price of the basket in the given year , then multiplied by 100 . Previous year divided by the price of the basket in the given year , then multiplied by 100 . Given year divided by the price of the basket in the base year , then multiplied by 100 .

Which is the largest component of GDP ?

Government purchasesd Consumption Net exports Investment Consumption

Which of the following statistics is usually regarded as the best single measure of a society's economic well - being ?

Gross domestic product The producer price index The size of the government surplus The GDP deflator Gross domestic product

The percentage change in the price level from one period to another is called the

Growth rate . Inflation rate . GDP deflator . Unemployment rate GNP Inflation rate .

When the consumer price index falls , the typical family

Has to spend more dollars to maintain the same standard of living . Can spend fewer dollars to maintain the same standard of living . Can offset the effects of rising prices by saving more . Finds that its standard of living is not affected . Can spend fewer dollars to maintain the same standard of living .

In the actual economy , goods and services are purchased by

Households , but not firms or the government . Households and firms , but not the government . Households and the government , but not firms . Households , firms , and the government . Households , firms , and the government .

Alyssa , a Mexican citizen , works only in the United Kingdom . The value of the output she produces is

Included in neither U.K. GDP nor U.K. GNP . Included in both U.K. GDP and U.K. GNP . Included in U.K. GNP , but it is not included in U.K. GDP . Included in U.K. GDP , but it is not included in U.K. GNP . Included in U.K. GDP , but it is not included in U.K. GNP .

In the GDP accounts , production equals

Income + saving Income Income - government expenditures Income - exports Income

If an economy's GDP falls , then it must be the case that the economy's

Income falls and saving rises . Income and saving both fall . Income and expenditure both fall . Income falls and expenditure rises . Income and expenditure both fall .

A farmer produces lemons and sells them to Fresh Juice , which makes lemon juice . The lemons produced by the farmer are called

Inventory goods . Intermediate goods . Transitory goods . Final goods . Intermediate goods .

Gross domestic product includes all

Legal and illegal final goods and legal final services , but it excludes illegal final services . Legal and illegal final goods , but it excludes all legal and illegal services . Legal and illegal final goods and all legal and illegal final services . Legal final goods and services , but it excludes illegal final goods and services . Legal final goods and services , but it excludes illegal final goods and services .

The Karmic Deed Restaurant uses all of the following to produce vegetarian meals . Which of them is an example of physical capital ?

The fresh fruits , vegetables , and grains the restaurant uses to prepare its meals The owner's knowledge of how to prepare vegetarian entrees The tables and chairs in the restaurant The money in the owner's account at the bank from which she borrowed money The tables and chairs in the restaurant

Which of the following is correct ?

Nominal and real interest rates always move in opposite directions Nominal and real interest rates always move together . Nominal and real interest rates do not always move together . Nominal and real interest rates never move together . Nominal and real interest rates do not always move together .

Joe and Bob purchase oranges at a grocery store , but Bob also grows oranges in his backyard . Regarding these two practices , which of the following statements is correct ?

Only Joe's grocery store purchases are included in GDP . Only Joe's and Bob's grocery store purchases are included in GDP . Joe's and Bob's grocery store purchases are included in GDP . The oranges from Bob's backyard garden are included at their market value . Joe's and Bob's grocery store purchases are included in GDP . The oranges from Bob's backyard garden are included at their market value , if Bob provides this information . Only Joe's and Bob's grocery store purchases are included in GDP .

Changes in real GDP reflect

Only changes in prices . Only changes in the amounts being produced . Both changes in price and changes in the amounts being produced . Neither changes in price nor changes in the amounts being produced . Only changes in the amounts being produced .

After graduation , an American college student moves to Japan to teach English . Her salary is included

Only in U.S. GDP . In neither U.S. GDP nor Japan's GDP . Only in Japan's GDP . In both U.S. GDP and Japan's GDP . Only in Japan's GDP .

One problem with the consumer price index stems from the fact that , over time , consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive . This problem is called

Price - change neglect . Unmeasured quality change . Substitution bias . Relative bias . Substitution bias .

Each day Sasha works 6 hours and produces 7 units of goods and services . Clara works 10 hours each day and produces 9 units of goods and services . It follows that

Sasha's productivity is higher than Clara's . Clara's productivity is higher than Sasha's . Sasha's income per hour will be higher than Clara's . Sasha's income per day will be higher than Clara's . Sasha's productivity is higher than Clara's .

Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption ?

Spending on education The purchase of a new house The purchase of stocks and bonds The purchase of durable goods such as stoves and washing machines The purchase of a new house

Which of the following transactions represents the purchase of a final good ?

Starbucks purchases coffee beans . Apple computer buys computer processors from Intel . Delta buys a new European - made jetliner . Your father buys a new John Deere riding lawn mower . Your father buys a new John Deere riding lawn mower .

The term inflation is used to describe a situation in which

Stock - market prices are rising . The economy is growing rapidly . The overall level of prices in the economy is increasing . Incomes in the economy are increasing . The overall level of prices in the economy is increasing .

The CPI differs from the GDP deflator in that

The CPI is a price index , while the GDP deflator is an inflation index . Substitution bias is not a problem with the CPI , but it is a problem with the GDP deflator . Increases in the prices of foreign produced goodds that are sold to U.S. consumers show up in the CPI but not in the GDP deflator . Increases in the prices of domestically produced goods that are sold to the U.S. government show up in the CPI but not in the GDP deflator . Increases in the prices of foreign produced goodds that are sold to U.S. consumers show up in the CPI but not in the GDP deflator .

In 1870 , the richest country in the world was

The United States . Japan . The United Kingdom . Germany . The United Kingdom .

Which of the following does NOT add to U.S. GDP ?

The city of New York pays a salary to a policeman . Boeing manufacturers and sells a plane to Air France . General Motors builds a new auto factory in North Carolina . The federal government sends a Social Security check to your grandmother . The federal government sends a Social Security check to your grandmother .

Which of the following is an example of human capital ?

The comfortable chair in your dorm room where you read economics texts The amount you get paid each week to work at the library The things you have learned this semester Any capital goods that require a human to be present to operate The things you have learned this semester

An economy's gross domestic product is

The excess of spending over income . The excess of income over spending . Total income and total spending . Total income times total spending . Total income and total spending .

Out of the following economic statistics , which is the best measure of economic prosperity ?

The level of real GDP The growth rate of real GDP The level of nominal GDP The price level The level of real GDP

Social Security payments are indexed for inflation using the CPI . A recent newspaper editorial claimed that Social Security recipients are harmed by years of low inflation because they do not receive as large an increase in their payments as they do in years of high inflation . Which of the following statements is correct ?

The newspaper editorial is correct under all circumstances . The newspaper editorial is correct if the market basket consumed by Social Security recipients is the same as the market basket used to compute the CPI . The newspaper editorial could be correct if the prices of the goods consumed by Social Security recipients change at a different rate than the prices of the goods in the market basket used to compute the CPI The newspaper editorial is incorrect under all circumstances . The newspaper editorial could be correct if the prices of the goods consumed by Social Security recipients change at a different rate than the prices of the goods in the market basket used to compute the CPI

Which of the following statements is correct ?

The percentage change in the CPI is a measure of the inflation rate , but the percentage change in the GDP deflator is not a measure of the inflation rate . The CPI can be used to compare dollar figures from different points in time . Compared to the CPI , the GDP deflator is the more common gauge of inflation . The GDP deflator better reflects the goods and services bought by consumers than does the CPI . The CPI can be used to compare dollar figures from different points in time .

Some poor countries appear to be falling behind rather than catching up with rich countries . Which of the following could explain the failure of a poor country to catch up ?

The poor country uses a lot of resources to promote free trade policies . The poor country has a health epidemic such as the Zika virus . The poor country wasted resources fighting corruption . The poor country heavily invests in education . The poor country has a health epidemic such as the Zika virus .

Which of the following is included in the calculation of GDP ?

The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country . The purchase of a new edition of a foreign textbook that was produced in a different nation . The purchase of ink and paper supplies by a textbook company for the production of new textbooks . The purchase of a used textbook from a friend who took the same class last year . The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country .

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate ?

The real interest rate is the nominal interest rate divided by the rate of inflation . The real interest rate is the nominal interest rate minus the rate of inflation . The real interest rate is the nominal interest rate plus the rate of inflation . The real interest rate is the nominal interest rate times the rate of inflation . The real interest rate is the nominal interest rate minus the rate of inflation .

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate ?

The real interest rate is the nominal interest rate times the rate of inflation . The real interest rate is the nominal interest rate minus the rate of inflation . The real interest rate is the nominal interest rate plus the rate of inflation . The real interest rate is the nominal interest rate divided by the rate of inflation . The real interest rate is the nominal interest rate minus the rate of inflation .

When ranking movies by nominal box office receipts , what important fact is overlooked ?

There are no good substitutes for movies currently . Movies and DVD are complements . More people go to movies now than in the past . Prices , including those for movie tickets , have been rising over time . Prices , including those for movie tickets , have been rising over time .

If the consumer price index was 93 in Year 1 , 97 in Year 2 , and 100 in Year 3 , then the base year must be

Year 1 . Year 2 . Year 3 . the base year cannot be determined from the given information . Year 3 .

When economists talk about growth in the economy , they measure that growth as the

absolute change in nominal GDP from one period to another . percentage change in nominal GDP from one period to another . absolute change in real GDP from one period to another . percentage change in real GDP from one period to another . percentage change in real GDP from one period to another .

Investment , as defined by economists , would not include which of the following ? Ford

adds 1,000 new cars to inventories . buys U.S. government bonds . buys a new robotic machine ( from a plant in Ohio ) to assemble cars . builds another assembly plant in the United States . buys U.S. government bonds .

Indexation refers to

an adjustment made by the Bureau of Labor Statistics to the CPI so that the index is in line with the GDP deflator . using a law or contract to automatically correct a dollar amount for the effects of inflation . a process of adjusting the nominal interest rate so that it is equal to the real interest rate . using a price index to deflate dollar values . using a law or contract to automatically correct a dollar amount for the effects of inflation .

The United Kingdom is

an advanced economy , and over the past century its rate of economic growth has been lower than that of the United States . a middle - income country , and over the past century its rate of economic growth has been lower than that of the United States . a middle - income country , and over the past century its rate of economic growth has been higher than that of the United States . an advanced economy , and over the past century its rate of economic growth has been higher than that of the United States . an advanced economy , and over the past century its rate of economic growth has been lower than that of the United States .

Japan is

an advanced economy , and over the past century its rate of economic growth has been lower than that of the United States . an advanced economy , and over the past century its rate of economic growth has been higher than that of the United States . a middle - income country , and over the past century its rate of economic growth has been higher than that of the United States . a middle - income country , and over the past century its rate of economic growth has been lower than that of the United States . an advanced economy , and over the past century its rate of economic growth has been higher than that of the United States .

Productivity is the amount of goods and services

an economy produces . It is not linked to a nation's economic policies . an economy produces . It is linked to a nation's economic policies . produced for each hour of a worker's time . It is not linked to a nation's economic policies . produced for each hour of a worker's time . It is linked to a nation's economic policies . produced for each hour of a worker's time . It is linked to a nation's economic policies .

Suppose a country increases trade restrictions . This country would be pursing

an inward - oriented policy , which most economists believe has beneficial effects on the economy . an inward - oriented , which most economists believe has adverse effects on the economy . an outward - oriented policy , which most economists believe has beneficial effects on the economy . an outward - oriented policy , which most economists believe has adverse effects on the economy . an inward - oriented , which most economists believe has adverse effects on the economy .

Most goods and services produced at home

and most goods and services produced illegally are included in GDP . are included in GDP while most goods and services produced illegally are excluded from GDP are excluded from GDP while most goods and services produced illegally are included in GDP and most goods and services produced illegally are excluded from GDP and most goods and services produced illegally are excluded from GDP

An increase in the price of bread produced domestically will be reflected in

both the GDP deflator and the consumer price index . neither the GDP deflator nor the consumer price index . the GDP deflator but not in the consumer price index . the consumer price index but not in the GDP deflator . both the GDP deflator and the consumer price index .

The value of goods added to a firm's inventory in a certain year is treated as

consumption , since the goods will be sold to consumers in another period . intermediate goods , and so is not included in that year's GDP . investment , since GDP aims to measure the value of the economy's production that year . spending on durable goods , since the goods could not be inventoried unless they were durable . investment , since GDP aims to measure the value of the economy's production that year .

In an economy where net exports are zero , if saving rises in some period , then in that period

consumption and investment fall . consumption falls and investment rises . consumption rises and investment falls . consumption rises and investment falls . consumption falls and investment rises .

The consumer price index is used to

convert nominal GDP into real GDP . turn dollar figures into meaningful measures of purchasing power . characterize the types of goods and services that consumers purchase . measure the quantity of goods and services that the economy produces . turn dollar figures into meaningful measures of purchasing power .

If your firm's production function has constant returns to scale , then if you double all your inputs , your firm's output will

double and productivity will rise . double but productivity will not change . more than double and productivity will rise . more than double but productivity will not change . double but productivity will not change .

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

fails to account for consumer spending on housing . accounts only for consumer spending on food , clothing , and energy . fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods . fails to account for the introduction of new goods . fails to account for the introduction of new goods .

If an American - based firm opens and operates a new clothing factory in Honduras , then it is engaging in

foreign portfolio investment . foreign financial investment . foreign direct investment . indirect foreign investment . foreign direct investment .

In recent decades , Americans have increased their purchase of stocks of foreign - based companies . The Americans who have bought these stocks were engaged in

foreign portfolio investment . indirect domestic investment . foreign direct investment . foreign indirect investment . foreign portfolio investment .

Educational attainment tends to be

high in countries with high population growth . low in countries with low population growth . low in countries with high population growth . unrelated to population growth . low in countries with high population growth .

Michael learns how to sew from his grandmother . This is an example of

human capital , but not technological knowledge . technological knowledge , but not human capital . both human capital and technological knowledge . neither human capital nor technological knowledge . human capital , but not technological knowledge .

An understanding of the best ways to produce goods and services is called

human capital . physical capital . technology . productivity . technology .

Legalizing all forms of illegal activities

increases GDP and reduces the size of the underground economy . reduces GDP and increases the size of the underground economy . reduces GDP and reduces the size of the underground economy . increases GDP and increases the size of the underground economy . increases GDP and reduces the size of the underground economy .

The level of real GDP per person

is very similar across countries , but the growth rate of real GDP per person differs widely across countries . and the growth rate of real GDP per person are similar across countries . and the growth rate of real GDP per person vary widely across countries . differs widely across countries , but the growth rate of real GDP per person is similar across countries . and the growth rate of real GDP per person vary widely across countries .

The key determinant of the standard of living in a country is

its growth rate of real GDP . the total amount of its physical capital . the total amount of goods and services produced within the country . the amount of goods and services produced from each hour of a worker's time . the amount of goods and services produced from each hour of a worker's time .

The output of Mexican citizens who work in Texas would be included in the

net national product of the United States . gross domestic product of Mexico . gross national product of the United States . gross national product of Mexico . gross national product of Mexico .

A recession has traditionally been defined as a period during which

nominal GDP declines for two consecutive quarters . nominal GDP declines for four consecutive quarters . real GDP declines for two consecutive quarters . real GDP declines for four consecutive quarters . real GDP declines for two consecutive quarters .

Apple founder Steve Jobs received patents on many of his ideas . While the patents existed , his ideas were

public goods and proprietary knowledge . public goods but not proprietary knowledge . private goods and proprietary knowledge . private goods but not proprietary knowledge . private goods and proprietary knowledge .

The GDP deflator is the ratio of

real GDP to nominal GDP multiplied by 100 . real GDP to the inflation rate multiplied by 100 . nominal GDP to real GDP multiplied by 100 . nominal GDP to the inflation rate multiplied by 100 . nominal GDP to real GDP multiplied by 100 .

Social Security payments are indexed for inflation using

real interest rates . the CPI . the GDP deflator . the PPI . the CPI .

Over the last few decades , Americans have chosen to cook less at home and eat more at restaurants . This change in behavior , by itself , has

reduced measured GDP . not affected measured GDP . increased measured GDP by the value of the restaurant meals . increased measured GDP by the value added by the restaurant's preparation and serving of the meals . increased measured GDP by the value added by the restaurant's preparation and serving of the meals .

The catch - up effect refers to the idea that

saving will always catch - up with investment spending . it is easier for a country to grow fast and so catch - up if it starts out relatively poor . population eventually catches - up with increased output . if investment spending is low , increased saving will help investment to " catch - up . " it is easier for a country to grow fast and so catch - up if it starts out relatively poor .

The key determinant of the standard of living in a country is

the amount of goods and services produced from each hour of a worker's time . the total amount of goods and services produced within the country . the total amount of its physical capital . its growth rate of real GDP . the amount of goods and services produced from each hour of a worker's time .

Depreciation is

the decline in the value of the stock market , net of dividends . the value of worn - out equipment , machinery , and buildings . the value of the addition to the capital stock . the value of the decrease in business inventory stocks . the value of worn - out equipment , machinery , and buildings .

Refer to Table 24-4 . If the nominal interest rate was 8 percent in Year 2 , then

the real interest rate in Year 2 was 4 percent . the real interest rate in Year 2 was 12 percent . Will's Year 1 food expenditures in Year 2 dollars amount to $ 5,800 . Will's Year 1 food expenditures in Year 3 dollars amount to $ 6,200 . the real interest rate in Year 2 was 4 percent .