For each of the following years, determine the real interest rate. Find the difference between this rate and the desired real interest rat and explain how any difference affects borrowers and lenders. Write out percentage rates as whole numbers e.g. 5%. a. In year 1, the nominal interest rate is 10%, the inflation premium on loans is 4%, and actual rate of inflation is 5%. %, the desired real interest is %, borrowers are (Click to select) and lenders are The real interest rate is (Click to select) b. In year 2, the nominal interest rate is 11%, the inflation premium is 5%, and the actual rate of inflation is 3%. %, borrowers are [(Click to select) and lenders are The real interest rate is %, the desired real interest is [ (Click to select) c. In year 3, the nominal interest rate is 9%, the inflation premium is 3%, and the actual rate of inflation is 3%. %, the desired real interest is %, borrowers are (Click to select) and lenders are The real interest rate is (Click to select)

For each of the following years, determine the real interest rate. Find the difference between this rate and the desired real interest rat and explain how any difference affects borrowers and lenders. Write out percentage rates as whole numbers e.g. 5%. a. In year 1, the nominal interest rate is 10%, the inflation premium on loans is 4%, and actual rate of inflation is 5%. %, the desired real interest is %, borrowers are (Click to select) and lenders are The real interest rate is (Click to select) b. In year 2, the nominal interest rate is 11%, the inflation premium is 5%, and the actual rate of inflation is 3%. %, borrowers are [(Click to select) and lenders are The real interest rate is %, the desired real interest is [ (Click to select) c. In year 3, the nominal interest rate is 9%, the inflation premium is 3%, and the actual rate of inflation is 3%. %, the desired real interest is %, borrowers are (Click to select) and lenders are The real interest rate is (Click to select)

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

For each of the following years, determine the real interest rate. Find the difference between this rate and the desired real interest rate
and explain how any difference affects borrowers and lenders. Write out percentage rates as whole numbers e.g. 5%.
a. In year 1, the nominal interest rate is 10%, the inflation premium on loans is 4%, and actual rate of inflation is 5%.
%, the desired real interest is
%, borrowers are (Click to select) and lenders are
The real interest rate is
(Click to select)
b. In year 2, the nominal interest rate is 11%, the inflation premium is 5%, and the actual rate of inflation is 3%.
%, borrowers are (Click to select)
%, the desired real interest is
The real interest rate is
(Click to select) ✓
c. In year 3, the nominal interest rate is 9%, the inflation premium is 3%, and the actual rate of inflation
is 3%.
%, borrowers are (Click to select)
and lenders are
The real interest rate is
(Click to select)
%, the desired real interest is
and lenders are

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Given the following table about the level of the consumer price index (CPI), perform calculations and show your work in the coming parts of the question. Consumer Price Index Year Consumer Price Index 2015 139.5 2016 144.7 2017 2018 160.1 2019 168.1 Calculate the inflation rate in 2016. If the inflation rate was 6 percent in 2018, calculate the CPI in 2017.
Suppose your nominal income in dubai economic rose by 6.4 percent and the price level rose by 4.2 percent in some year Required: a. Calculate the percentage of real income (approximately) in dubai b. Assume that the nominal income rose by 4.1 percent and your real income rose by 2.7 percent in some year, Calculate the approximate rate of inflation
The relationship between the inflation rate and the unemplotment rate is it a micro or macro decison? explain why
assume instead that the nominal interest rate is 4 percent and the expected rate of inflation is minus 1 percent. Calculate the real rate of interest.
A rise in the amount of inflation, given a fixed nominal interest rate will cause: A. The nominal interest rate to rise B. The nominal interest rate to fall C. The real interest rate to rise D. The real interest rate to fall
The table below shows the annual change in the average nominal wage and inflation rate since 2008. a. Compute the percentage change in real income for each year shown in the table. Instructions: In part a, round your answers to two decimal places. In parts b and c, enter your answers as a whole number. If entering a negative number, include a minus sign. Percentage Changes in Nominal Income and Prices Year 2008 2009 2010 2011 2012 2013 Annual Inflation Rate (percent) 3.78% -0.39 1.6 3.09 2.02 1.42 Annual Nominal Wage Growth (percent) 0.31% -1.1 -0.69 1.27 2.46 2.07 Annual Real Wage Growth (percent) b. Of the years listed above, the paycheck of the average worker declined in c. Of the years listed above, the purchasing power of the average worker declined in of the six years. d. The average real income of households can increase whether the nominal wage increases or decreases of the six years.
Refer to the hypothetical data in the table to answer the three questions. What was the real interest rate in 2017? Year Nominal interest rate Real interest rate Inflation rate 2017 3% — 5% 2018 5% 5% — 2019 — 3% 1% % What was the inflation rate in 2018? % What was the nominal interest rate in 2019? %
ces For each of the following years, determine the real interest rate. Find the difference between this rate and the desired real interest rate and explain how any difference affects borrowers and lenders. Write out percentage rates as whole numbers e.g. 5%. a. In year 1, the nominal interest rate is 7%, the inflation premium on loans is 2%, and actual rate of inflation is 3%. The real interest rate is [ %, the desired real interest is b. In year 2, the nominal interest rate is 8%, the inflation premium The real interest rate is%, the desired real interest is %, borrowers are [(Click to select) and lenders are [(Click to select) is 3%, and the actual rate of inflation is 1%. ]%, borrowers are [(Click to select) and lenders are [(Click to select) is 1%. c. In year 3, the nominal interest rate is 6%, the inflation premium is 1%, and the actual rate of inflation The real interest rate is %, the desired real interest is %, borrowers are (Click to select) and lenders are (Click to select)