Given the following information,
estimate the nominal rate with the approximate nominal interest rate equation and the true nominal interest rate equation for each set of real and inflation rates.
Real Rate |
Inflation Rate |
Approximate Nominal Rate |
True Nominal Rate |
||||
3.0% |
5.0% |
? |
? |
||||
8.08.0% |
15.0% |
? |
? |
||||
1.0% |
4.0% |
? |
? |
||||
2.5% |
3.5% |
? |
? |
Given the following information, estimate the nominal rate with the approximate nominal interest rate equation and...
Inflation, nominal interest rates, and real rates. The minister of finance for the State of Tranquility has just estimated the expected inflation rate for the coming year at 6.59%. If the real rate for the coming year is 4.32%, what should the nominal interest rates at the central bank of the State of Tranquility be for the coming year? Use the approximate nominal interest rate equation and the true nominal interest rate equation to determine the rates. Using the approximate...
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