Suppose the prices of both apples and bread rise by 10% between year 1 and year 2 and the quantities of both goods fall by 5%. a) What would be the percentage change in nominal GDP? Instructions: Round your answer to one decimal place. % b) What would be the percentage change in real GDP? Instructions: Round your answer to one decimal place. % c) Choose the answer below that best explains the different impacts of these changes on real and nominal GDP: multiple choice Real GDP changes take account of both price and quantity changes, but the fall in quantities dominated the rise in prices. Nominal GDP changes are influenced only by price changes and that is why nominal GDP rose. Nominal GDP changes will always be positive, regardless of what happens to quantities. Real GDP changes are influenced only by quantity changes and the quantities of both goods fell.

Gulliver travel agencies thinks interest rates in europe are low. the firm borrows euros at 5 percent for one year. during this time period the dollar falls 11 percent against the euro. what is the effective interest rate on the loan for one year? (consider the 11 percent fall in the value of the dollar as well as the interest payment.)

As sales exceed the break‑even point, a high contribution‑margin percentage (a) increases profits faster than does a low contribution-margin percentage (b) increases profits at the same rate as a low contribution-margin percentage (c) decreases profits at the same rate as a low contribution-margin percentage (d) increases profits slower than does a low contribution-margin percentage

3. saving two consumers, larry and jeff, have utility functions defined over the two periods of their lives: middle age (period zero) and retirement (period 1). they have the same income in period 0 of m dollars and they will not earn income in period 1. the interest rate they face is r. larry’s and jeff’s utility functions are as follow. = 0.5 + 0.5 and = 0.5 + 0.5 for each person is between zero and one and represents each consumer’s temporal discount econ 340: intermediate microeconomics. ben van kammen: purdue university. rate. a. write the budget constraint that applies to both jeff and larry in terms of consumption in each period and ), interest rate, and m. b. what is larry’s and what is jeff’s marginal rate of intertemporal substitution? c. what is the slope of the budget constraint? d. write each consumer’s condition for lifetime utility maximization. e. re-arrange the conditions from part (d) to solve for the ratio, . f. if > which consumer will save more of his middle age income? g. if > 1 1+ , in which period will larry consume more: = 0 or = 1?