Suppose the price level reflects the number of dollars needed to buy a basket of goods containing one cup of coffee, one donut, and one newspaper. year one, the basket costs $8.00. In year two, the price of the same basket is $7.00. From year one to year two, there is In year one, $40.00 will buy baskets, and in year two, $40.00 will buy This example illustrates that, as the price level falls, the value of money at an annual rate of baskets.

Suppose the price level reflects the number of dollars needed to buy a basket of goods containing one cup of coffee, one donut, and one newspaper. year one, the basket costs $8.00. In year two, the price of the same basket is $7.00. From year one to year two, there is In year one, $40.00 will buy baskets, and in year two, $40.00 will buy This example illustrates that, as the price level falls, the value of money at an annual rate of baskets.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter18: Introduction To Macroeconomics: Unemployment, Inflation, And Economic Fluctuations

Section: Chapter Questions

Problem 18P

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25) Hillary is trying to determine the cost of health care to college students and parents’ ability to cover those costs. She assumes that the cost of one year of health care for a college student is $1,000 today, that the average student is 18 when he or she enters college, that inflation in health care cost is rising at the rate of 10 percent per year, and that parents can save $100 per year to help cover their children’s costs. All payments occur at the end of the relevant period, and the $100/year savings will stop the day the child enters college (hence 18 payments will be made). Savings can be invested at a nominal rate of 6 percent, annual compounding. Hillary wants a health care plan that covers the fully inflated cost of health care for a student for 4 years, during Years 19 through 22 (with payments made at the end of Years 19 through 22). How much would the government have to set aside now (when a child is born), to supplement the average parent’s share of a child’s college…
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Assume that Abdullah has RO 44 to spend on Energy drinks and Protein Bars each month and that both goods must be purchased whole (no fractional units). Energy drinks cost RO 8 and Protein Bars cost RO 3 each. Abdullah's preferences for Energy drinks andProtein Bars are summarized by the following information: Energy drinks Protein Bars No. per Month MU/P No. per MU/Py TU MU TU MU Month 1 42 1 18 78 33 3. 108 3 45 4 132 4 54 60 150 162 63 168 66 a. Fill in the figures for marginal utility and marginal utility per dollar both Energy drinks and Protein Bars. b. Are these preferences consistent with the law of ckminishing marginal utility? Explain briefly. c. Given the budget of RO 22, what quantity of Protein Bars and what quantity of Energy drinks will maximize Joe's level of satisfaction? 56
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Assume that Abdullah has RO 44 to spend on Energy drinks and Protein Bars each month and that both goods must be purchased whole (no fractional units). Energy drinks cost RO 8 and Protein Bars cost RO 3 each. Abdullah’s preferences for Energy drinks and Protein Bars are summarized by the following information: Energy drinks Protein Bars No. per Month TU MU MU/Px No. per Month TU MU MU/Py 1 42 1 18 2 78 2 33 3 108 3 45 4 132 4 54 5 150 5 60 6 162 6 63 7 168 7 66 Fill in the figures for marginal utility and marginal utility per dollar both Energy drinks and Protein Bars. Are these preferences consistent with the law of diminishing marginal utility? Explain briefly. Given the budget of RO 22, what quantity of Protein Bars and what quantity of Energy drinks will maximize Joe’s…
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