Explain if he following people will gain or lose during deflation.
1.A tenant who has entered into a fixed-rent contract to rent an apartment for two years.
2.A businessman who has borrowed money from a bank at a fixed interest rate.
Suppose the proportion of foodstuffs in the composite consumer price index is 25.5%.When the price of food increase by 60%.the composite CPI will increase by________
- Anonymous1 decade agoFavorite Answer
1. In deflation. the purchasing power of money increased, while the tenant is paying the same amount of money with higher purchasing power,he/she lose.
2. lose,same idea with Q1
sorry i cant answer your 3rd question,coz i forget the calculation of CPI, and does CPI shows with%? i just know it will shown on numbers only.
- 小強Lv 71 decade ago
- R HoLv 61 decade ago
CPI = Value of base year’s quantities at current yr prices/base yr prices. It is represented by an index (value) not percentage.
Assume the previous CPI = 100. Now the only thing changed is the price of food by 60%. Thus, its impact to the CPI is an increase of 60% * 25.5%, i.e., 15.3%.
2007-09-15 01:30:55 補充：
Also, the new CPI would now be 115.3.