Answered: Year Prime Interest Rate Inflation Rate…

Business

Economics

Year Prime Interest Rate Inflation Rate 1970 7.9% 5.7% 1974 10.8% 11.0% 1978 9.1% 7.6% 1981 18.9% 10.3% Table 19.10

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter7: Unemployment And Inflation

Section: Chapter Questions

Problem 3.7P

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Question

The “prime” interest rate is the rate that banks
charge their best customers. Based on the nominal
interest rates and inflation rates in Table 19.10, in
which of the years would it have been best to be a
lender? Based on the nominal interest rates and inflation
rates in Table 19.10, in which of the years given would
it have been best to be a borrower?

Year
Prime Interest Rate
Inflation Rate
1970 7.9%
5.7%
1974 10.8%
11.0%
1978
9.1%
7.6%
1981
18.9%
10.3%
Table 19.10

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