Question

1 On Feb 1, 2022, the yield (nominal interest rate) on the Canadian government issued 10-year bond was 1.77% (that part is true). Given that yield, it is impossible for the real interest rate on this bond to be negative.

2 Suppose the table below shows the prices and quantities of the average household consumption basket (bundle) in a country over two years. Since the price of good A decreased by 5% and the price of good B increased by 5%, then (using year 1 is the base year), the inflation rate in the CPI equals 0%.

  

Good A

Good B

Price A Year 1 $10.00

Year 2 $9.50

Quantity A

200 240

Price B

$4.00 $4.20

Quantity B

2000 1000

             

3 Suppose a giant snowstorm leaves you snowed in. If your snowblower owning neighbour comes over to help you dig out, this is worse for economic wellbeing than if you had hired a snow removal company to do the same thing.

Answer 1

1.

2.

3.Yes, it will be worse, since in the second case there would be payment for services, from this payment there will be wages and taxes to the state, i.e. cash flow