1.7 If the real interest rate is negative, then: a) the inflation rate is larger than...
1.7 If the real interest rate is negative, then:
a) the inflation rate is larger than the nominal interest
rate.
b) the inflation rate is smaller than the real interest rate.
c) the inflation rate is smaller than the nominal interest
rate.
d) lenders will gain.
e) the real value of a loan will increase.
Homework Answers
1.7
Correct Answer:
A.
Working note:
Real interest rate = nominal interest rate - inflation rate
If inflation rate is bigger than the nominal rate of interest, then real interest rate will become negative.
For example, if inflation rate is 5%, nominal rate is 4%,
Then, real interest rate = 4%-5% = -1%
Add Answer to:
1.7 If the real interest rate is negative, then:
a) the inflation rate is larger than...
Question 1 1.7 pts Whenever the expected inflation rate is positive The real interest rate is...
Question 1 1.7 pts Whenever the expected inflation rate is positive The real interest rate is negative O the real interest rate is greater than the nominal interest rate O The nominal interest rate must be equal to the real interest rate The real interest rate is positive O None of the above
The nominal interest can be negative if the inflation rate is greater than the nominal interest...
The nominal interest can be negative if the inflation rate is greater than the nominal interest rate. can be negative if deflation occurs. can be negative if inflation is unexpected. will never be negative. can be negative when the real interest rate is negative.
Determine if each statement is true or false. True False Answer Bank Borrowers gain when inflation...
Determine if each statement is true or false. True False Answer Bank Borrowers gain when inflation is lower than expected, If inflation is higher than the nominal interest rate, the real interest rate is negative Loan contracts specify the nominal interest rate, Real interest rates will never go negative. Lenders gain when inflation is lower than expected,
please print out words show the answer，thanks！ 8. Suppose real interest rate r-4% and expected inflation...
please print out words show the
answer，thanks！
8. Suppose real interest rate r-4% and expected inflation rate for the following year En 4%. (a) What is the nominal interest rate? (2 points) (b) What is the ex ante real interest rate? (2 points) Suppose the actual inflation rate at the end of the following year π turned out to be 6%. (c) What is the ex post real interest rate? (3 points) (d) Borrowers (gain/oseand lende and lenders (gain/lose) (4...
When the real rate of interest is less than the nominal rate of interest, then: A....
When the real rate of interest is less than the nominal rate of interest, then: A. inflation must be added to the nominal rate. B. investment returns do not increase purchasing power. C. nominal flows should be discounted with real rates. D. inflation is expected to occur.
True False Answer Bank Borrowers gain when inflation is higher than expected. Loan contracts specify the...
True False Answer Bank Borrowers gain when inflation is higher than expected. Loan contracts specify the nominal interest rate. Real interest rates will never go negative. If inflation is higher than the nominal interest rate, the real interest rate is negative. Borrowers lose when inflation is higher than expected.
The real interest rate A. is equal to the nominal interest rate minus the inflation rate.
The real interest rate A. is equal to the nominal interest rate minus the inflation rate. B. is the interest rate that adjusts GDP for changes in prices. C. is equal to the inflation rate minus the nominal interest rate. D. is the interest rate that is quoted on a financial debt and a firm's assets.
If you lend money at a 12% nominal interest rate, but you expect inflation to be...
If you lend money at a 12% nominal interest rate, but you expect inflation to be 7% over the life of the loan, then you expect your purchasing power to grow at a rate of [1%. The real interest rate is negative when the nominal interest rate is If the nominal interest rate is 3% and the expected rate of inflation is 1%, then the real interest rate is ▼| the inflation rate. A. 2%. O B. 096. 3%. 1%....
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If the inflation rate is zero, then A.) both the nominal interest rate and the real interest rate can fall below zero. B.) the nominal interest rate can fall below zero, but the real interest rate cannot fall below zero. C.) the real interest rate can fall below zero, but the nominal interest rate cannot fall below zero. D.) neither the nominal interest rate nor the real interest rate can fall below zero.
If the nominal interest rate is 2% and the real interest rate is 1%, inflation is:...
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Question 1 1.7 pts Whenever the expected inflation rate is positive The real interest rate is negative O the real interest rate is greater than the nominal interest rate O The nominal interest rate must be equal to the real interest rate The real interest rate is positive O None of the above
The nominal interest can be negative if the inflation rate is greater than the nominal interest rate. can be negative if deflation occurs. can be negative if inflation is unexpected. will never be negative. can be negative when the real interest rate is negative.
Determine if each statement is true or false. True False Answer Bank Borrowers gain when inflation is lower than expected, If inflation is higher than the nominal interest rate, the real interest rate is negative Loan contracts specify the nominal interest rate, Real interest rates will never go negative. Lenders gain when inflation is lower than expected,
please print out words show the
answer，thanks！
8. Suppose real interest rate r-4% and expected inflation rate for the following year En 4%. (a) What is the nominal interest rate? (2 points) (b) What is the ex ante real interest rate? (2 points) Suppose the actual inflation rate at the end of the following year π turned out to be 6%. (c) What is the ex post real interest rate? (3 points) (d) Borrowers (gain/oseand lende and lenders (gain/lose) (4...
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If you lend money at a 12% nominal interest rate, but you expect inflation to be 7% over the life of the loan, then you expect your purchasing power to grow at a rate of [1%. The real interest rate is negative when the nominal interest rate is If the nominal interest rate is 3% and the expected rate of inflation is 1%, then the real interest rate is ▼| the inflation rate. A. 2%. O B. 096. 3%. 1%....
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