4. Inflation and interest ratesThe following table shows the average nominal interest rates on six-month Treasury bills between 2004 and 2008, which determined the nominalinterest rate that the U.S. government paid when it issued debt in those years. The table also shows the inflation rate for the years 2004 to 2008. (Allrates are rounded to the nearest tenth of a percent.)Nominal Interest Rate Inflation RateYear(Percent)(Percent)20041.62.720053.43.420064.83.220074.42.920081.63.8Source: "FRED Economic Data," Federal Reserve Bank of SL. Louis, last modified September 23, 2019, accessed September 24, 2019, helps://fred.stlouisfed.arg.On the following graph, use the orange points (square symbol) to plot the nominal interest rates for the years 2004 to 2008. Next, use the greenpoints (triangle symbol) to plot the real interest rates for those years.5.04.0Naminal Interest Rate3.020Real Interest Rate1.0-1.0-20-302009200420052008200720082009YEARAccording to the table, in which year did buyers of six-month Treasury bills receive the highest real return on their investment?O 2004O 2005O 2006O 2007O 2008INTEREST RATE (Percent)

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Nominal Interest Rate Inflation Rate Year (Percent) (Percent) 2004 1.6 2.7 2005 3.4 3.4 2006 4.8 3.2 2007 4.4 2.9 2008 1.6 3.8 Source: "FRED Economic Data," Federal Reserve Bank of St. Louis, last modled September 23, 2019, accessed feptember 24, 2019, Mtps://fred.stlouisfed.org. On the following graph, use the orange points (square symbol) to plot the nominal interest rates for the years 2004 to 2008. Next, use the green points (triangle symbol) to plot the real interest rates for those years. 5.0 4.0 Nominal Interest Ratn 30 20 Real Interest Rate 1.0 1.0 20 -30 2000 2004 200s 200 2007 200e 2000 YEAR According to the table, in which year did buyers of six-month Treasury bills receive the highest real return on their investment? O 2004 O 2005 O 2006 O 2007 O 2008 INTEREST RATE (Percent)

Nominal Interest Rate Inflation Rate Year (Percent) (Percent) 2004 1.6 2.7 2005 3.4 3.4 2006 4.8 3.2 2007 4.4 2.9 2008 1.6 3.8 Source: "FRED Economic Data," Federal Reserve Bank of St. Louis, last modled September 23, 2019, accessed feptember 24, 2019, Mtps://fred.stlouisfed.org. On the following graph, use the orange points (square symbol) to plot the nominal interest rates for the years 2004 to 2008. Next, use the green points (triangle symbol) to plot the real interest rates for those years. 5.0 4.0 Nominal Interest Ratn 30 20 Real Interest Rate 1.0 1.0 20 -30 2000 2004 200s 200 2007 200e 2000 YEAR According to the table, in which year did buyers of six-month Treasury bills receive the highest real return on their investment? O 2004 O 2005 O 2006 O 2007 O 2008 INTEREST RATE (Percent)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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