Explain when the market rate of interest is equal to the real rate of interest?
Explain when the market rate of interest is equal to the real rate of interest?
Homework Answers
When the inflation in the economy is zero, then the market interest rate is equal to the real rate of interest.
According to the Fisher formula,
(1 + nominal interest rate) = (1 + real rate of interest) * (1 + inflation),
So, when inflation is zero, the market rate of interest is equal to the real rate of interest. The real interest rate is the market rate of interest rate adjusted for inflation.
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Explain when the market rate of interest is equal to the real
rate of interest?
D. equal to the market rate of interest when an investment is made. 49. Compounding refers...
D. equal to the market rate of interest when an investment is made. 49. Compounding refers to the A. calculation of after tax interest returns. B. internal rate of return a firm ears on an investment. C. real interest return after taxes. D. process of earning interest on both the principal and the interest of an investment. 50. Which formula below best expresses the real interest rate, (c)? A. i = r - Te B. r= i + Tre C....
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.
Part 1 - Use the loanable funds market to graphically show how real interest rate (r),...
Part 1 - Use the loanable funds market to graphically show how real interest rate (r), saving (S) and investment (I) would change when the goverment increase the tax rate on interest income. Explain in detail. Part 2 - Use the loanable funds market to graphically show how real interest rate (r), saving (S) and investment (I) would change when the goverment cut the tax rate on corporate prot. Explain in detail.
(i) Explain the concept of a 'Real Rate of Interest. How does the real rate of...
(i) Explain the concept of a 'Real Rate of Interest. How does the real rate of interest differ from the notional interest rate charged against (or received) by consumers of financial products? Explain the 'real rate of interest' principle using the example of a client who has $100,000 of their money invested in an 'at call, bank account which is currently paying 0.5% per annum. (8 marks)
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.
Explain the meaning of nominal interest rate and real interest rate. How are they related? There should...
Explain the meaning of nominal interest rate and real interest rate. How are they related? There should be +6 sentences (75 words)
QUESTION 20 In the classical model, if the real interest rate is lower than the equilibrium...
QUESTION 20 In the classical model, if the real interest rate is lower than the equilibrium interest rate in the goods market, then total demand for goods is A. higher than the total supply. B. lower than total supply. C. can be equal to total supply. D. none of the above. QUESTION 21 In the classical model, if total demand for goods is less than total supply, then real interest rate will A. fall. B. rise. C. may remain the...
In words, the real rate of interest is approximately equal to 0 the nominal rate minus...
In words, the real rate of interest is approximately equal to 0 the nominal rate minus the inflation rate. O the inflation rate divided by the nominal rate. O the nominal rate plus the inflation rate. O the nominal rate times the inflation rate. O the inflation rate minus the nominal rate.
For an imaginary economy, when the real interest rate is 7 percent, the quantity of loanable...
For an imaginary economy, when the real interest rate is 7 percent, the quantity of loanable funds demanded is $500 and the quantity of loanable funds supplied is $500. Currently, the nominal interest rate is 9 percent and the inflation rate is 4 percent. Currently, A. the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will rise. B. the quantity of loanable funds supplied exceeds the quantity of...
The nominal interest rate is 12%. The inflation rate is 3%. The real interest rate is...
The nominal interest rate is 12%. The inflation rate is 3%. The real interest rate is equal to %.
D. equal to the market rate of interest when an investment is made. 49. Compounding refers to the A. calculation of after tax interest returns. B. internal rate of return a firm ears on an investment. C. real interest return after taxes. D. process of earning interest on both the principal and the interest of an investment. 50. Which formula below best expresses the real interest rate, (c)? A. i = r - Te B. r= i + Tre C....
(i) Explain the concept of a 'Real Rate of Interest. How does the real rate of interest differ from the notional interest rate charged against (or received) by consumers of financial products? Explain the 'real rate of interest' principle using the example of a client who has $100,000 of their money invested in an 'at call, bank account which is currently paying 0.5% per annum. (8 marks)
QUESTION 20 In the classical model, if the real interest rate is lower than the equilibrium interest rate in the goods market, then total demand for goods is A. higher than the total supply. B. lower than total supply. C. can be equal to total supply. D. none of the above. QUESTION 21 In the classical model, if total demand for goods is less than total supply, then real interest rate will A. fall. B. rise. C. may remain the...
In words, the real rate of interest is approximately equal to 0 the nominal rate minus the inflation rate. O the inflation rate divided by the nominal rate. O the nominal rate plus the inflation rate. O the nominal rate times the inflation rate. O the inflation rate minus the nominal rate.
The nominal interest rate is 12%. The inflation rate is 3%. The real interest rate is equal to %.
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