Chapter 5, Problem 6CT

Summary Introduction

Inflation: Inflation is a condition when the prices of goods and services rise. During inflation, with every unit of money, one can buy a smaller number of goods and services.

Interest rate: The amount charged by the lender from the borrower for use of its money is called as the interest rate. The interest rate is always in percent form.

To determine:

The impact on interest rates when inflation changes.