Option 1. The nominal interest rate is 8% and the inflation rate is 7%
Explanation: In this case, the real interest rate is = nominal rate - inflation = 8% - 7% = 1%
This is the lowest real interest rate out of the 4 options.
In which case would people desire to borrow the most? be the nominal interest rate is...
In which situation is the real interest rate highest? A) The nominal interest rate is 25% and the inflation rate is 30% B) The nominal interest rate is 2% and the inflation rate is 1% C) The nominal interest rate is 8% and the inflation rate 5% D) The nominal interest rate is 11% and the inflation rate 9% Please provide explanation thanks
What is the real interest rate if the nominal interest rate is still 8% but inflation is 1%? Does it cost more or less to borrow than when inflation was 3%?
A higher tax rate on interest income provides an incentive for private saving, but a higher interest rate provides a disincentive for private saving Select one: True False People would desire to borrow more if the nominal rate of interest is 6 percent with a corresponding inflation rate of 2 percent than if the nominal rate of interest is 5 percent with a corresponding inflation rate of 3 percent. Select one: True False Mutual funds are one type of financial...
22. Under which of the following assumptions would the nominal interest rate be equal to the real interest rate? (a) expected inflation is equal to the nominal interest rate (b) expected inflation is equal to the real interest rate (c) expected inflation is negative (d) expected inflation is equal to zero (e) none of the above 23. If the nominal interest rate is less than the real interest rate, we know that (a) both the nominal or real interest rate...
The nominal interest rate is the 1)rate of interest charged to most large commercial borrowers. 2)the rate charged on loans for automobiles and other personal loans but not the rate charged on home loans. 3)equal to the real interest rate minus the inflation rate. 4)the interest rate that is corrected for inflation. 5)the interest rate that is not corrected for inflation.
The nominal interest rate is the: same as the real interest rate. rate of interest that investors pay to borrow money. rate of inflation minus the real rate of interest. real rate of interest minus the rate of inflation.
Assume that currently the nominal interest rate is 5% and people expect the rate of price inflation for the next year to be 3%. Additionally, the price level today is P-100. A lender lends $100,000 for a year to a borrower. If instead he spent the money today, he would be able to buy units of goods and services. The borrower will pay to the lender next year., With that amount of back units of goods noney, the lender will...
Agree or disagree? 75 word reply A nominal interest rate measures the change in dollar amounts. It is quoted on bonds and loans. Nominal interest rate is simple; for example, if you borrow $1000 at a 5% interest rate, you can expect to pay $50 in interest without taking inflation into account. The con of using the nominal interest rate is the fact that it does not adjust for the inflation rate. Whereas a real interest rate does take inflation...
Suppose the nominal interest rate equals 9%, the expected inflation rate is 5%, and actual inflation turns out to be 3%. In this case, the: a. ex ante real interest rate is 4%. b. ex post real interest rate is 4%. C. ex ante real interest rate is 6%. d. ex post real interest rate is 2%
What would you expect the nominal rate of interest to be if the real rate is 5.0 percent and the expected inflation rate is 3.0 percent? The nominal rate of interest would be nothing%. (Round to two decimal places.)