Suppose coal experiences a 3% increase per year in real terms over the foreseeable future. The I cost of 1,000 cubic feet of coal is now $6,000.
a. What will be the cost in real terms of 1,000 cubic feet of coal in 20 years?
b. If the general price inflation rate for the next 20 years is expected to average 4% per year, what will 1,000 cubic feet of coal cost in actual dollars 20 years from now?
This question was answered on: Jul 11, 2017
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