Technology Enhances the Chances of Success in a Business

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Technology Enhances the Chances of Success in a Business

            Technology has revolutionized several industries, including business. Today, technological advancements such as fast internet speeds, smart devices, and Big Data have changed how firms operate. Technology enhances the chances of business success by enabling businesses to gather, disseminate, and process information quickly.

            Technology makes businesses more successful by allowing companies to leverage information more rapidly. Zara, a leading fashion brand, spent heavily on information technology which allowed it to improve its distribution system significantly (Roll n.p.). Zara's technology-driven distribution system enables it to have seamless information exchange across its stores and its headquarters, which helps it to keep up with the latest trends. Additionally, technology is crucial in aiding businesses to become more productive at lesser cost by reducing the time from product conception until it gets to the market (Wilburn and Wilburn 23). The adoption of technology-enabled Zara to considerably minimize lead times and to respond to shifting market trends quicker. Hence, technology helps businesses to become more profitable by developing an efficient distribution system which caters to customers' needs and keeps up with the latest trends.

            Apart from making firms more successful by allowing them to leverage information more quickly, technology also enables firms to tap into the e-commerce market. In 2010, Zara ventured into the e-commerce space by setting up its first online shop that was available in only a few countries (Roll n.p.). However, a few years later, Zara's online business has extended across Europe and now accounts for approximately 10% of its global sales. The move by Zara to enter the e-commerce market was informed by its well-designed information technology system that allows it to gather data on the latest trends. When the e-commerce market was booming, Zara already had the right information to join the market and reach out to a broader reach of customers. Therefore, technology helps a business to become better by offering them a more extensive range of the market through e-commerce.

            In conclusion, technology enhances the chances of business success by enabling businesses to gather, disseminate, and process information quickly. Zara is an example of a company that benefitted from heavily investing in information technology. Technology also allows firms to take advantage of the e-commerce market to reach more clients.

Works Cited

Roll, Martin. "The Secret of Zara's Success: A Culture of Customer Co-creation." Martin Roll:Business and Brand Strategist, Mar. 2018, martinroll.com/resources/articles/strategy/the-secret-of-zaras-success-a-culture-of-customer-co-creation/.

Wilburn, Kathleen M., and H. R. Wilburn. "The Impact of Technology on Business and Society." Global Journal of Business Research, vol. 12, no. 1, 2018, pp. 23-29.

Personal Statement

From a tender age, long before I could fathom the particulars of science or its numerous fields, I had already developed a compelling desire to practice in the healthcare profession. This desire was as a result of a tragic incident that occurred to my family when I was around ten years old. My beloved little sister, upon premature discharge from the hospital, passed on. The heartbreaking incident happened in my home country, Nigeria. I was utterly devastated. She had been discharged from the hospital because we could no longer afford her medical upkeep. We desperately sought for ways to help her in vain. The loss engraved in me a deep desire to dedicate my life to caring for the sick, and in particular the sick and the poor. Nevertheless, it was not until my senior year in high school that I married my desire to my specific liking for human biology.

My childhood imaginations of how the body works were that there were little persons who always labored to make metabolic processes possible. Honestly, I was thrilled and overly excited to learn and understand the word metabolism later in life at Texas State University. I was very encouraged to confirm the reality of my imagination in real life. My imagination of little persons matched the relationship of body cells to the rest of the body in general. My thirst for learning, great sense of imagination, and the ability to relate textbook knowledge to the practical anatomy it refers to have brought me a long way in becoming the health caregiver that I always aspired to be.

ECON 201 - DATA EXERCISE #1

DATA EXERCISE #1

Due at the end of week 2

Format of the Project:

The Data Exercise must be posted to the LEO Student Assignments as a Attachments are limited to a maximum two files in doc, docx., xls. xlsx., or rtf. formats. OTHER FORMATS ARE NOT ACCEPTABLE, will not be reviewed or graded.

Please note that hand-written and scanned works, pdf. files, jpg. files, as well as files posted in google drive, will not be accepted or graded.

The paper should be written in APA style Research Paper format.

No more than 20% of the text of the project should be made up of quotes.

Please note that Use of APA Citation Methodology is required for all parts of the assignment

Written projects must be:

1. typed, double-spaced, in 12-point Times New Roman or Arial font, with margins no wider than one inch
2. have footnotes or endnotes, with correct citations
3. have a bibliography of sources used
4. include, for each entry, the author, title, city and state of publisher, publisher's name, year, and page numbers
5. prepared using word processing software (Microsoft Word preferred), in a manner similar to the preparation of a written assignment for classroom submission 

Data exercise #1 Assignment

Consists of four parts.

Part 1: Expenditures Approach to Calculating GDP (weight 25% of the assignment grade)

Complete the following exercise

Visit the Bureau of Economic Analysis website at www.bea.gov. From the drop-down menu under “Data”, click on “by Economics Account”.

Then click on “National”> “Gross Domestic Product > and “Full Release and Tables”. (To find “Full Release and Tables” you need to scroll down the page to the section “Current Release".

Use table 3 (Gross Domestic Product: Level and Change from Preceding Period). Table 3 is located on page 9, so you need to scroll all the way down to page 9.

The left columns are nominal GDP (and its components) and the right half represents real GDP (chained 2012 dollars).

1. Create the table that contains the following information for the last available quarter. Please note that using the data for previous quarters will produce grade zero for this part of the project.

You need this information from both parts of the table 3- (nominal GDP (and its components) from left columns and real GDP (chained 2012 dollars) from the right part of the table 3). Omit the intermediate lines found in Table 3 on the web site.

Gross domestic product

Personal consumption expenditures

Gross private domestic investment

Net exports of goods and services

Government consumption expenditures and gross investment

b) Calculate the percentage (the proportion) of each category in nominal GDP and in real GDP.

Using Nominal GDP:

[Personal consumption expenditures / Nominal GDP]*100%

[Gross private domestic investment / Nominal GDP]*100%

[Net exports of goods and services / Nominal GDP]*100%

[Government consumption expenditures and gross investment/ Nominal GDP]*100%

And using Real GDP:

[Personal consumption expenditures / Real GDP]*100%

[Gross private domestic investment / Real]*100%

[Net exports of goods and services / Real GDP]*100%

[Government consumption expenditures and gross investment/ Real GDP]*100%

 Present the information that you received (a) and (b) as a table(s) in your project. 

2. Write a report (2 pages double - spaced), which contains an analysis of the results you received.

In this report consider, but do not be limited to the following:

1. Why was the nominal GDP greater than the real GDP? By how much?
2. GDP is composed of a number of categories. What category makes up the largest portion of GDP? What category makes up the smallest portion of GDP?
3. What is “Gross private domestic investment”? What does gross private domestic investment measure?
4. What is “Net exports of goods and services”? Why it is negative?
5. In the left part of the table 3 (nominal GDP) find the category “National defense”. How much was the National defense for the last quarter? Calculate percentage of National defense out of “Government consumption expenditures and gross investment”. Calculate percentage of National defense out of GDP.
6. Please analyze and discuss the significance of the data that you received for this Data exercise. Reflect on what you have learned from this exercise.

Part 2: Income Approach to Calculating GDP (weight 25% of the assignment grade)

Complete the following exercise:

Go to http://www.bea.gov/

Visit the Bureau of Economic Analysis website at www.bea.gov. From the drop-down menu under “Data”, click on “by Economics Account”. Then click on “National”, “Gross Domestic Product, and “Full Release and Tables”. Use table 7 (Relation of Gross Domestic Product, Gross National Product, and National Income) and table 8 (Personal Income and its Disposition).

1. Create the table that contains the following information for the last available quarter. Please note that using the data for previous quarters will produce grade zero for this part of the project.

Omit the intermediate lines found in Tables 7 and 8 on the web site.

Gross domestic product

Gross national product

Net national product (you should calculate it as Gross national product minus Consumption of fixed capital)

National income

Personal income

 Present the information that you received in your project.

2. Write a report in your own words (1 page, double-spaced), which contains the analysis of the results you received. In this report consider, but do not be limited to the following:

1. What is the difference between gross domestic product (GDP) and gross national product (GNP)? What is the difference in what GDP measures compared to GNP?
2. Based on the table, what calculations must you make to determine GNP from GDP?
3. What is national income (NI)? What does NI measure?
4. Which was higher in this year, GNP or NI? By how much?
5. What calculations must you make to determine NI from GNP?
6. NI is composed of a number of categories. What category makes up the largest portion of NI?
7. Please analyze and discuss the significance of the data that you received for this Data exercise. Reflect on what you have learned from this exercise.

Part 3: GDP in Different Countries (weight 25% of the assignment grade)

Complete the following exercise:

Go to World Development Indicators database:

http://databank.worldbank.org/data/views/variableSelection/selectvariables.aspx?source=world-development-indicators

1. Select 12 countries for your project by checking the check boxes under Country. 
2. Select the 2 data series GDP (current US$) and Population (Total) under Series. 
3. Select the most recent year under Time. Please use the last year when the data is available. Otherwise you will get zero for this part of the project.
4. Choose Layout on the upper left side of the screen. Under Orientation choose “Page” for Time, “Column” for Series, “Row” for Country.
5. Retrieve data. You can now retrieve data by clicking on the options on the right upper side of the window.  Clicking “Table” will allow you to see data.  Click “Download options” and choose “Data on this page only – formatted”. This option will allow you to download the data in Excel, which can then be copied into your report file. Or you can simply type the required data into the table below. Fill in the table below.
6. Present the table in your project.
7. Calculate the per capita GDP for the most recent available year for the countries with the equation given in the far right column.

Country	GDP	Population	Per Capita GDP
1	2	3	4 = 2/3

Write a short report in your own words (1 page, double-spaced), which contains the analysis of the results you have gotten. In this report consider, but do not be limited to the following:

1. List the countries by highest per capita GDP to lowest.
2. Does the order remain the same for total GDP as for per capita GDP.
3. If not, explain why is it different?
4. Please analyze and discuss the significance of this data and reflect on what you have learned from this exercise.

Part 4: Index of Economic Freedom (weight 25% of the assignment grade)

Log onto the Heritage Foundation's website at https://www.heritage.org/index/

“Today, we live in the most prosperous time in human history. Poverty, sicknesses, and ignorance are receding throughout the world, due in large part to the advance of economic freedom. In 2019, the principles of economic freedom that have fueled this monumental progress are once again measured in the Index of Economic Freedom, an annual guide published by The Heritage Foundation, Washington's No. 1 think tank.

For over twenty years the Index has delivered thoughtful analysis in a clear, friendly, and straight-forward format. With new resources for users and a website tailored for research and education, the Index of Economic Freedom is poised to help readers track over two decades of the advancement in economic freedom, prosperity, and opportunity and promote these ideas in their homes, schools, and communities.

The Index covers 12 freedoms – from property rights to financial freedom – in 186 countries.”

Click on COUNTRY RANKING to find the Rank and the Overall Score of economic freedom.

Click on EXPLORE THE DATA to find the Rank of business, trade, financial freedom, and property rights.

1. Find the Rank and Overall Score in economic freedom (overall) of the countries that you were using in part III of the assignment. Present this information as table(s) in your project.
2. Find the scores in business, trade, financial freedom, and property rights of the countries that you were using in part III of the assignment. Present this information as table(s) in your project.
3. Compare the Rank in economic freedom (overall) and other indicators with the order of the countries using the per capita GDP in the table in part III of the assignment. 
4. Write a report in your own words (1 page, double-spaced), which contains the analysis of the results that you received. Discuss the significance of the data and what you feel is the relevance of rankings. Please reflect on what you have learned from this assignment.

Solved: ECON 201 Principles of Macroeconomics Chapter 22 - Inflation

Ch22 Inflation

Multiple Choice Questions

1. __________ implies that pressure for price increases reaches across _______________markets, not just one.

A. inflation; all

B. deflation; most

C. inflation; most

D. deflation; all

Answer: C  Reference:

Explanation:

Type: Multiple Choice                   

2. While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices.

A. ongoing decrease

B. ongoing rise

C. short term rise

D. short term decrease

Answer: B  Reference:

Explanation:

Type: Multiple Choice                    

3. The effects of inflation are seen in:

A. goods and services only

B. wages and income levels only

C. services and wages only

D. goods, services, wages and income levels

Answer: D  Reference:

Explanation:

Type: Multiple Choice                   

4. Inflation implies that the level of all prices _____________________.

A. decrease

B. stay the same

C. increase

D. none of the above

Answer: C  Reference:

Explanation:

Type: Multiple Choice                   

5. When Anders took out his first two-year membership with Maxima Gym in 2004, the fee was $540.00.  He renewed his membership three times; in 2006 for $580.00, in 2008, for $600.00, and again in 2010, for $630.00. What is the overall rate of inflation for Anders' gym membership?

A. 8.6%

B. 5.4%

C. 7.87%

D. 16.66%

Answer: D  Reference:

Explanation:

Type: Multiple Choice                   

6. Inflation can be calculated in terms of how the overall cost of ___________________ changes over time.

A. all goods

B. the basket of goods

C. all goods and services

D. all services

Answer: B  Reference:

Explanation:

Type: Multiple Choice                   

7. If the price index moves from 107 to 110, the rate of inflation is:

A. 3%

B. 30%

C. 28%

D. 2.8%

Answer: D  Reference:

Explanation:

Type: Multiple Choice                    

8. The most commonly cited measure of inflation in the United States is:

A. the Consumer Price Index (CPI).

B. the Deflationary Price Index (DPI)

C. the Cumulative Price Index (CPI)

D. the Inflationary Price Index (IPI)

Answer: A  Reference:

Explanation:

Type: Multiple Choice                    

9. One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer’s true cost of living, is:

A. substitution bias

B. attribution bias

C. complimentary bias

D. preference bias

Answer: A  Reference:

Explanation:

Type: Multiple Choice                    

10. The percentage change in the price level from one time period to the next, whether the price level is measured in terms of money or as a price index, will be the _____________.

A. inflation rate

B. price index rate

C. consumer price index

D. producer price Index

Answer: A  Reference:

Explanation:

Type: Multiple Choice                    

11. The basket of goods in the Consumer Price Index consists of about _________ products; that is, several hundred specific products in over __________ broad-item categories.

A. 200; 800

B. 80,000; 400

C. 80,000; 200

D. 800; 200

Answer: C  Reference:

Explanation:

Type: Multiple Choice                  

12. Two factors that complicate the calculation of the inflation rate are:

A. substitution and quality/new product bias

B. preferential bias

C. complimentary product bias

D. consumer behavior bias

Answer: A  Reference:

Explanation:

Type: Multiple Choice                   

13. When we want to measure wage inflation in the labor market, we use the:

A. Consumer Price Index

B. Product Price Index

C. Employment Cost Index

D. Employment Price Index

Answer: C  Reference:

Explanation:

Type: Multiple Choice                    

14. The Producer Price Index is based on prices paid for supplies and inputs by:

A. consumers

B. producers of goods and services

C. government

D. the small business sector

Answer: B  Reference:

Explanation:

Type: Multiple Choice                   

15. The ____________________ is based on the prices of merchandise that are exported or imported.

A. International Product Index

B. Producer Price Index

C. Foreign Price Index

D. International Price Index

Answer: A  Reference:

Explanation:

Type: Multiple Choice                    

16. Another term used to describe negative inflation is:

A. counter inflation

B. deflation

C. hyperinflation

D. GDP deflator

Answer: B  Reference:

Explanation:

Type: Multiple Choice                   

17. In the early 1990’s extremely high inflation rates of 2500% were common in Russia. During that time, we can say that as a result of those inflation rates, Russia was experiencing ___________________.

A. perpetual inflation

B. ultra inflation

C. hypo inflation

D. hyperinflation

Answer: D  Reference:

Explanation:

Type: Multiple Choice                    

18. Which of the following is an example of one of the major categories in the overall CPI?

A. apparel and accessories

B. entertainment

C. recreation

D. transportation and insurance

Answer: C  Reference:

Explanation:

Type: Multiple Choice                    

19. The situation where the buying power of money in terms of goods and services increases is called:

A. deflation.

B. inflation.

C. stationary pricing.

D. hyperinflation.

Answer: A  Reference:

Explanation:

Type: Multiple Choice                    

20. Which of the following is the name used to describe the price index that consists of intermediate goods and finished goods?

A. Producer Price Index

B. Consumer Price Index

C. Employment Cost Index

D. Processing Price Index

Answer: A  Reference:

Explanation:

Type: Multiple Choice                   

21. What name is given to the index based on the prices of exported or imported merchandise?

A. U.S. Producer Trade Index

B. International Trade Index

C. International Price Index

D. U.S. Producer Price Index

Answer: C  Reference:

Explanation:

Type: Multiple Choice                   

22. An economics professor is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it?

A. Consumer Price Index

B. GDP Price Index

C. Consumer GDP

D. GDP Deflator

Answer: D  Reference:

Explanation:

Type: Multiple Choice                   

23. The GDP deflator is a price index that includes the following components of GDP:

A. Consumption

B. Consumption plus Investment but not Exports

C. Consumption, Investment plus Exports minus Imports

D. Consumption, Investment, Government plus Exports minus Imports

Answer: D  Reference:

Explanation:

Type: Multiple Choice                    

24. With regard to the economy, the term negative inflation is synonymous with which of the following?

A. recession

B. depression

C. deflation

D. hyperinflation

Answer: C  Reference:

Explanation:

Type: Multiple Choice                   

25. An analyst needs to adjust the nominal GDP for the years 2000 and 2010 into real terms to conclude his comparison analysis. The nominal GDP in 2000 was $672 billion and $1,690 billion for 2010; the real interest rate was 6.79% in 2000 and 3.71% in 2010; the 2000 deflator was 24 and 51 in 2010. What is the real gain?

A. 18.34%

B. 38.58%

C. 151.48%

D. 70.61%

Answer: A  Reference:

Explanation:

Type: Multiple Choice                   

26. Alex wants to measure the nominal 1998 GDP of $993 billion in 2008 dollars. From the data he gathered, he knows the deflator for 1998 is 30 and for 2008, it is 74, and that real interest in those years was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be?  

A. $430 billion

B. $835 billion

C. $2,063 billion

D. $2,449 billion

Answer: D  Reference:

Explanation:

Type: Multiple Choice                   

27. What distinguishes the real value of a statistic from the nominal value of a statistic?

A. timing of announcement

B. adjusting for inflation

C. adjusting for GDP deflator

D. real interest rate

Answer: B  Reference:

Explanation:

Type: Multiple Choice                   

28. Nancy's union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively. How will Nancy's wage increase be expressed in the new contract?

A. COLA plus 1.6%

B. COLA plus 1.9%

C. COLA plus 2.4%

D. COLA plus 2.2%

Answer: C  Reference:

Explanation:

Type: Multiple Choice                   

29. When a price, wage, or interest rate is adjusted automatically with inflation, it is said to be __________.

A. indexed

B. COLAed

C. nominally adjusted

D. semi-indexed

Answer: A   Reference:

Explanation:

Type: Multiple Choice                   

30. In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had _______________________ which guaranteed that their wages would keep up with inflation.

A. cost of living adjustments

B. inflation protection plans

C. inflation ceiling guarantees

D. wage protection clauses

Answer: A  Reference:

Explanation:

Type: Multiple Choice                   

31. The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer’s true cost of living, because it doesn’t take into account that the person can substitute between goods according to changes in their relative prices.

A. stabilize

B. understate

C. overstate

D. reduce

Answer: C  Reference:

Explanation:

Type: Multiple Choice                   

32. The __________________ is the nominal interest rate minus the rate of inflation.

A. real GDP

B. real interest rate

C. nominally adjusted

D. annualized interest rate

Answer: B  Reference:

Explanation:

Type: Multiple Choice                   

33. A payment is said to be ________________ if it is automatically adjusted for inflation.

A. cross referenced

B. indexed

C. matched

D. maintained

Answer: B   Reference:

Explanation:

Type: Multiple Choice                   

34. A lender demands an interest rate in part to compensate for any expected ___________, so that the money that is repaid in the future will have at least as much buying power as the money that was originally loaned.

A. risk premium

B. inflation

C. compound interest

D. opportunity costs

Answer: B  Reference:

Explanation:

Type: Multiple Choice                   

Essay Questions

1. Identify and contrast the differences between the rise in prices due to inflation and the rise in prices in microeconomic markets.

The first difference is that price changes in the microeconomic supply-and-demand model refer to a price in a particular market. Inflation implies that pressure for price increases reaches across most markets, not just one.

The second difference is that price increases in the supply-and-demand model were one-time events, representing a shift from a previous equilibrium to a new one. Inflation over short time periods may happen occasionally, but the term typically implies an ongoing rise in prices.

Reference:

Explanation:

Type: Essay                   

2. Describe the formula used to calculate the annual rate of inflation.

Level in new year - level in original year x 100 = percentage change

___________________________________________

                (level in original year)

Reference:

Explanation:

Type: Essay                   

3. Explain why statisticians use index numbers to calculate the rate of inflation. Describe the formula for the calculation.

Statisticians use index numbers as substitutes for dollar amounts to simplify the task of interpreting the price levels for more realistic and complex baskets of goods.

Total amount spent in base year      =     Total amount spent in other year

__________________________________                ___________________________________

Index number in base year, always 100      Index number in other year

Reference:

Explanation:

Type: Essay                   

4. Identify the most commonly cited measure of inflation in the United States and explain how it is calculated. Identify and briefly discuss the subtle problem that statisticians have paid considerable attention to in recent years.

The most commonly cited measure of inflation in the United States is the Consumer Price Index (CPI). The CPI is calculated by government statisticians at the U.S. Bureau of Labor Statistics based on the price level based on a basket of goods and services that represents the purchases of the average consumer.

In recent years, the statisticians at the Bureau of Labor Statistics have paid considerable attention to the subtle problem that measuring how the total cost of buying a fixed basket of goods has evolved over time is conceptually not quite the same as measuring a change in the cost of living, which represents how much it costs for a person to feel that their consumption provides an equal level of satisfaction or utility.

Reference:

Explanation:

Type: Essay                   

5. Identify and briefly describe the problems that always arise from measuring price levels with a fixed basket of goods and what steps can be taken to counter these problems.

Measuring price levels with a fixed basket of goods will always have two problems, namely substitution bias and quality/new goods bias.

The substitution bias, arises when using a fixed basket of goods because it does not allow for buying more of what is relatively less expensive and less of what is relatively more expensive.

The quality/new goods bias arises when using a fixed basket because doing so cannot take into account improvements in quality and the advent of new goods.

Both of these problems can be reduced in degree—for example, by allowing the basket of goods to evolve over time—but they cannot be totally eliminated.

Reference:

Explanation:

Type: Essay                   

6. Contrast the influence of inflation with the influence of deflation with respect to the buying power of money in terms of goods and services.

Inflation is a time when the buying power of money in terms of goods and services is reduced. Deflation is a time when the buying power of money in terms of goods and services increases.

Reference:

Explanation:

Type: Essay                   

7. Russia experienced inflation of 2500% per year in the early 1990s. Identify the term used to describe this extreme level of inflation rate and briefly discuss the contributing economic factors that caused this situation to arise.

Historically, Russia had a controlled economy with very low rates of measured inflation because prices were forbidden to rise by law. During those times, the Russian population also had perpetual shortages of goods, because forbidding prices to rise acted like a price ceiling and created a situation where the quantity of goods demanded often exceeded the quantity supplied. As Russia made a transition toward a more market-oriented economy in the 1990s, the price ceilings were eliminated and as a consequence the economy experienced an outburst of extreme inflation, known as hyperinflation before settling in time to a more reasonable rate of inflation at less than 10%.

Reference:

Explanation:

Type: Essay                   

8. Describe the relationship between inflation levels in prices and inflation levels for prices, wages and interest rates with respect to their ability to affect people's economic status and business outcomes. 

If all prices, wages, and interest rates adjusted automatically and immediately with inflation, then no one’s purchasing power or profits or real loan payments would change. However, if other economic variables do not move exactly in sync with inflation, or if they adjust for inflation only after a time lag, then inflation can cause three types of problems: unintended redistributions of purchasing power, blurred price signals, and difficulties in long-term planning.

Reference:

Explanation:

Type: Essay                   

9. In 1996 the U.S. government began offering indexed bonds. Contrast the use of traditional government bonds with government indexed bonds. Include a brief explanation of the benefits of each form of bond and identify the party that received that benefit.

Traditionally, government bonds have paid a fixed rate of interest. This policy gave a government that had borrowed an incentive to encourage inflation, because it could then repay its past borrowing in inflated dollars at a lower real interest rate.

Indexed government bonds promise to pay a certain real rate of interest above whatever inflation rate occurs. A retiree trying to plan for the long term and worried about the risk of inflation, will benefit by purchasing indexed government bonds which guarantee a rate of return higher than inflation no matter the level of inflation.

Reference:

Explanation:

Type: Essay                   

10. Compare the different measures of inflation known as GDP deflator, the Producer Price Index and explain how to calculate the real interest rate.

The GDP deflator is based on a basket of goods representing everything in GDP. The Producer Price Index is based on a basket of goods representing supplies and inputs bought by producers of goods and services. The real interest rate is calculated by subtracting the rate of inflation from the nominal interest.

Reference:

Explanation:

Type: Essay                   

 11. Why does $100 in the future not have the same value as $100 today?

Reference:

Explanation: Even if you knew with complete certainty that the $100 will be repaid in the future, and even if the rate of inflation is zero, it is still annoying to wait several years for repayment. If you have the money now, you can spend it on something now if you wish to do so and receive benefits from that spending. Being forced to wait is an intangible cost, but still a cost. This cost of having to wait is referred to as the time value of money.

Type: Essay