Homework answers / question archive / Consider the case of an individual who lives for two periods, earns an income nominal of $ 10,000 in each of them, and has an initial and final amount of null assets

Consider the case of an individual who lives for two periods, earns an income nominal of $ 10,000 in each of them, and has an initial and final amount of null assets

Economics

Share With

Consider the case of an individual who lives for two periods, earns an income nominal of $ 10,000 in each of them, and has an initial and final amount of null assets. The nominal interest rate, R, of loans in dollars is 12% and the rate of expected inflation between the two periods is 8%.

Suppose the price level is 1 in the first period.

What is the price level in period 2 and what is the real value of the income from period 2?