Homework Answers
Ans) the correct option is d) expected inflation is equal to 0
Ans) the correct option is c) expected deflation must be occurring
Ans) the correct option b) i = 1%
Real interest rate = nominal interest rate - expected inflation
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22. Under which of the following assumptions would the nominal interest rate be equal to the...
1. i) Write down the relationship between real interest rate, nominal interest rate, and expected inflation....
1. i) Write down the relationship between real interest rate, nominal interest rate, and expected inflation. ii) Using the relationship from i), fill in the following table. iii) What does the Fed hope when it engages in monetary expansion to get the economy out of recession? iv) Which situation(s) in the filled-in table corresponds to Zero Lower Bound? v). Use two rows of the completed table to explain why with Zero Lower Bound is it necessary to have positive expected...
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.
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
Assume that the inflation rate is positive. Given this information, which of the following is always...
Assume that the inflation rate is positive. Given this information, which of the following is always true? A. The nominal interest rate must be equal to the real interest rate. B. The nominal interest rate must be greater than the real interest rate. C. The real interest rate is greater than the nominal interest rate. D. The real interest rate is negative. E. The real interest rate is positive.
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.
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.
Question Completion Status: QUESTION 22 Which among the following statements is correct about the relationship between...
Question Completion Status: QUESTION 22 Which among the following statements is correct about the relationship between inflation and interest rates? There is no relationship between inflation and interest rates The interest rate is determined by the rate of inflation In order to fully understand inflation, we need to know how to correct for the effects of interest rates In order to fully understand interest rates, we need to know how to correct for the effects of inflation QUESTION 23 Which...
Suppose the nominal interest rate on savings accounts is 11% per year, and both actual and expected inflation are equal to 5%.
6. The Fisher effect and the cost of unexpected inflation Suppose the nominal interest rate on savings accounts is 11% per year, and both actual and expected inflation are equal to 5%. Complete the first row of the table by filling in the expected real interest rate and the actual real interest rate before any change in the money supply. Now suppose the Fed unexpectedly increases the growth rate of the money supply, causing the inflation rate to rise unexpectedly from 5% to...
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%....
If the inflation rate is zero, then A.) both the nominal interest rate and the real...
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.
1. i) Write down the relationship between real interest rate, nominal interest rate, and expected inflation. ii) Using the relationship from i), fill in the following table. iii) What does the Fed hope when it engages in monetary expansion to get the economy out of recession? iv) Which situation(s) in the filled-in table corresponds to Zero Lower Bound? v). Use two rows of the completed table to explain why with Zero Lower Bound is it necessary to have positive expected...
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.
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
Question Completion Status: QUESTION 22 Which among the following statements is correct about the relationship between inflation and interest rates? There is no relationship between inflation and interest rates The interest rate is determined by the rate of inflation In order to fully understand inflation, we need to know how to correct for the effects of interest rates In order to fully understand interest rates, we need to know how to correct for the effects of inflation QUESTION 23 Which...
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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