Macroeconomics (Book Only)
12th Edition
ISBN: 9781285738314
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 14.4, Problem 1ST
To determine
The real interest rate.
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Why does inflation have a positive effect on the nominal interest rate?
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The nominal rate of interest is the difference between the real rate and the expected rate of inflation.
The Nominal Interest rate and inflation rate in an economy is same.
What will be the real interest in such case?
Chapter 14 Solutions
Macroeconomics (Book Only)
Ch. 14.1 - Prob. 1STCh. 14.1 - Prob. 2STCh. 14.1 - Prob. 3STCh. 14.2 - Prob. 1STCh. 14.2 - Prob. 2STCh. 14.3 - Prob. 1STCh. 14.3 - Prob. 2STCh. 14.3 - Prob. 3STCh. 14.4 - Prob. 1STCh. 14.4 - Prob. 2ST
Ch. 14.4 - Prob. 3STCh. 14 - Prob. 1VQPCh. 14 - Prob. 2VQPCh. 14 - Prob. 3VQPCh. 14 - Prob. 4VQPCh. 14 - Prob. 5VQPCh. 14 - Prob. 1QPCh. 14 - Prob. 2QPCh. 14 - Prob. 3QPCh. 14 - Prob. 4QPCh. 14 - Prob. 5QPCh. 14 - Prob. 6QPCh. 14 - Prob. 7QPCh. 14 - Prob. 8QPCh. 14 - Prob. 9QPCh. 14 - Prob. 10QPCh. 14 - Prob. 11QPCh. 14 - Prob. 12QPCh. 14 - Prob. 13QPCh. 14 - Prob. 14QPCh. 14 - Prob. 15QPCh. 14 - Prob. 16QPCh. 14 - Prob. 17QPCh. 14 - Prob. 18QPCh. 14 - Prob. 1WNGCh. 14 - Prob. 2WNGCh. 14 - Prob. 3WNGCh. 14 - Prob. 4WNGCh. 14 - Prob. 5WNGCh. 14 - Prob. 6WNG
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- Jay and Joyce meet George, the banker, to work out the details of a mortgage. They all expect that inflation will be 2 percent over the term of the loan, and they agree on a nominal interest rate of 6 percent. As it turns out, the inflation rate is 5 percent over the term of the loan. a. What was the expected real interest rate? b. What was the actual real interest rate?arrow_forwardWhat is the Inflation-free interest rate? Give an example?arrow_forwardWhy is it important that the rate at which we earn interest should be higher than the inflation ratearrow_forward
- If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then what is the real rate of interest?arrow_forwardassume 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.arrow_forwardSuppose the nominal interest rate is 0.64 and the expected inflation rate is 0.47 1) What is the exact real interest rate? 2) What is the approximate real interest rate?arrow_forward
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