e. Suppose the CPI at the beginning of a year equals 120 and the actual inflation rate over the year is 2%. Calculate the ex-post real interest rate, using both the exact method and the approximate method. (Approximate real rate = -0.25%; Exact = -0.2451%) f. Suppose the CPI at the beginning of a year equals 120 and the expected inflation rate over the year is 1%. Calculate the expected real interest rate, using both the exact method and the approximate method. (Approximate real rate = 0.75%; Exact = 0.7426%)

e. Suppose the CPI at the beginning of a year equals 120 and the actual inflation rate over the year is 2%. Calculate the ex-post real interest rate, using both the exact method and the approximate method. (Approximate real rate = -0.25%; Exact = -0.2451%) f. Suppose the CPI at the beginning of a year equals 120 and the expected inflation rate over the year is 1%. Calculate the expected real interest rate, using both the exact method and the approximate method. (Approximate real rate = 0.75%; Exact = 0.7426%)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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