Answered: expected inflation equals

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Economics

expected inflation equals

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

if the real interest rate is -2.5% and the nominal interest rate is 6% expected inflation equals

Expert Solution

Step 1 Fisher Effect

Fisher Effect says that we can calculate the real interest rate by the following formula:

r = i - $π$ , where r is the real interest rate, i is the nominal interest rate and $π$ is the expected inflation rate

Step by step

Solved in 2 steps

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