Someone with dollar bills to lend will never agree to make a loan with a nominal interest rate of less than zero because:The lender would not get any dollars back from the borrowerThe lender is better off keeping the dollars than to agree to such a loanO It is mathematically impossible for the interest rate to be negativeIt would not be fair to lend money under such conditionsSuppose that inflation is expected to be at -3% per year for the foreseeable future.If the nominal interest rate is 0% per year, then the real interest rate isper year.

Nominal interest rate refers to the rate of interest before considering the inflation. A nominal…

Someone with dollar bills to lend will never agree to make a loan with a nominal interest rate of less than zero because: The lender would not get any dollars back from the borrower The lender is better off keeping the dollars than to agree to such a loan It is mathematically impossible for the interest rate to be negative It would not be fair to lend money under such conditions Suppose that inflation is expected to be at -3% per year for the foreseeable future. If the nominal interest rate is 0% per year, then the real interest rate is per year.

Someone with dollar bills to lend will never agree to make a loan with a nominal interest rate of less than zero because: The lender would not get any dollars back from the borrower The lender is better off keeping the dollars than to agree to such a loan It is mathematically impossible for the interest rate to be negative It would not be fair to lend money under such conditions Suppose that inflation is expected to be at -3% per year for the foreseeable future. If the nominal interest rate is 0% per year, then the real interest rate is per year.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 33P: The index number representing the price level changes from 110 to 115 in one year and then from 115...

See similar textbooks

Similar questions

The index number representing the price level changes from 110 to 115 in one year and then from 115 to 120 the next year. Since the index number increases by five each year, is five inflation rate each year? Is the inflation rate the same each year? Explain your answer.
Supposethat on January 1 2009, the TL price of thedollar is 1.40 overtheyear, inflation rate in Turkey is 25 % and U.S. inflation rate is 10%. Iftheexchange rate is $1= 1.50 TL at theend of theyear, whichcurrencyappearto be overvalued.?Explain your answer.
A country is experiencing an inflation rate of exactly 100 percent per month for 4 months. At the end of 4 months, the price level has increased _____ times in relationship to the initial period.
Interest RatesSuppose that you make a loan of $1,500 to your friend at a rate of 10% interest because you expect the inflation rate to be 5%.a) By how much does your purchasing power increase once the loan is completely paid off?b) Assuming that after the loan was repaid, you discovered that inflation rate over the life of the loan was only 2%. Who gained?
The average annual cost(tuition, fees, and room and board) at four-year private universities rose from $6,070in 1980 to $29,257 in 2004. Calculate the percentage rise in cost from 1980 to2004, and compare it to the overall rate of inflation as measured by the Consumer Price Index. The Consumer Price Index for 1980 is82.6and the Consumer Price index for 2004 is 188.9.The percentage rise in cost from 1980 to 2004 is %??(Round to the nearest tenth as needed.)
Suppose you lent money to a friend a few years ago at a nominal interest rate of 6%. At the time ot he loan, you expected the annual inflation rate to be 2%, but the actual annual inflation rate was 1.2%. When the loan originated, you expected to earn a real return of but due to unexpected disinflation, you earned an actual real return of A. 2%; 1.2% OB. 4.8%; 6% C. 6%; 4.8% D. 4%; 4.8%
Suppose you have $200,000 in a bank term account. You earn 5% interest perannum from this account.You anticipate that the inflation rate will be 4% during the year. However, theactual inflation rate for the year is 6%.Calculate the impact of inflation on the bank term deposit you have andexamine the effects of inflation in your city of residence with attention to foodand accommodation expenses.2. The Australian Bureau of Statistics (ABS) reported in May 2017 that the civilianpopulation in Australia over 15 years of age was 20.8 million.Of this population of 20.8 million Australians, 13.5 million were employed and0.7 million were unemployed.Calculate Australia’s labor force and the number of people in the civilianpopulation who were not in the labor force? Also,
If VIF- variance inflation factor is 1.25 what does it suggest when price is a function of income Is multicollinearity an issue here?
In 2016, you need $60000 a year to live comfortably.Assuming inflation remains at zero percent per year during the next 10 years, calculate the equivalent of $60,000 in 2026 dollars.
If l = 0, what does this imply about the relationshipbetween the nominal interest rate and the inflationrate?
Suppose you obtain a 30-year mortgage loan on which you have to pay a 7.0% (fixed) interest rate. Further suppose that you and your lender anticipate inflation will average 2.0% during the life of the loan. Now suppose the post-loan both inflation rate is actually 1.0% per annum. It follows that your real rate of interest is and, ceteris paribus, financially better off as a result of the difference between the anticipated and the unanticipated rate of inflation. O a. 3%, you are O b. 8%, your lender is Oc. 5%, you are O d. 6%, your lender is Next page
Your rich aunt is going to give you an end-of-year gift of $1,000 for each of the next 10 years. Solve, a. If general price inflation is expected to average 6% per year during the next 10 years, what is the equivalent value of these gifts at the present time? The real interest rate is 4% per year. b. Suppose that your aunt specified that the annual gifts of $1,000 are to be increased by 6% each year to keep pace with inflation. With a real interest rate of 4% per year, what is the current PW of the gifts?