The following table shows the average nominal interest rates on six-month Treasury bills between2004 and 2008, which determined the nominal interest rate that the U.S. government paid when itissued 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.)Year2004INTEREST RATE (Percent)2006200720085.03.0Source: "FRED Economic Data," Federal Reserve Bank of St. Louis, last modifiedSeptember 23, 2019, accessed September 24, 2019, https://fred.stlouisfed.org.On the following graph, use the orange points (square symbol) to plot the nominal interest ratesfor the years 2004 to 2008. Next, use the green points (triangle symbol) to plot the real interestrates for those years.281.02005-16-40-40Nominal Interest Rate Inflation Rate(Percent)1.620033.44.84.41.620042005200620072008(Percent)273.43.22.93.82006YEARNominal Interest RateReal Interest Rate(?)According to the table, in which year did buyers of six-month Treasury bills receive the highest realreturn on their investment?

Nominal interest rates don't account for inflation and real interest rates account for inflation.

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. INTEREST RATE (Percent 10 40 30 40 40 2000 YEAR 2004 2005 금 2006 2007 2008 Nominal Interest Rate Real Interest Rate According to the table, in which year did buyers of six-month Treasury bills receive the highest real return on their investment?

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. INTEREST RATE (Percent 10 40 30 40 40 2000 YEAR 2004 2005 금 2006 2007 2008 Nominal Interest Rate Real Interest Rate According to the table, in which year did buyers of six-month Treasury bills receive the highest real return on their investment?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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please answer part 3
10. What has happened to potential GDP over time? What has happened to the potential GDP growth rate over time? How are the answers to these two questions different? Explain. Before Graph
NEW QUESTION Consider the investment function of the IS model. Suppose that in the long-run 20% of GDP is spent on investment. Moreover, a one percentage-point increase of the real interest rate reduces the share of investment in GDP by one percentage point. Suppose that at some time t the real interest rate is equal to -1% while the rate of return of physical capital (think of it as the marginal product of capital) is 3%. What is the share of investment in GDP at time t?
2. In a two-period model, Jennifer expects to earn income of £15,000 in the second period but nothing in the current period; whereas Martin has income of £15,000 in the current period (everything adjusted for inflation). The real interest rate for both borrowing and lending is 30%. a) What is the present value of Jennifer’s future income? b) Show diagrammatically why Martin is better off than Jennifer. c) Show diagrammatically the impact of a fall in the interest rate for both Martin and Jennifer. Is it possible for a fall in interest rates to make Jennifer better off than Martin? d) Comment briefly on the implication of your answer to part (c) for the effectiveness of monetary policy carried out by changing the central bank interest rate.
3. Effects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate (Percent) 7 National Saving (Billions of dollars) 55 Domestic Investment (Billions of dollars) Net Capital Outflow (Billions of dollars) 30 -15 6 50 40 -10 5 45 50 -5 4 40 60 0 3 35 70 5 2 30 80 10 Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market. Market for Loanable Funds 10 O Demand 8 O Supply *+ Equilibrium 20 40 80 60 QUANTITY OF LOANABLE FUNDS REAL INTEREST…
Selim has no income in period 1 (consumption now) and an income of 1800Ł in period 2 (consumption later). The current interest rate is 20% (r=0.2) on consumer loans. Based on this information, answer the following questions a. What is the maximum amount that Selim can borrow to spend in period 1? Explain your answer. Can he spend 600 in period 2 and borrow 1000 in period 1?