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7.
b) Inflation rates will fall.
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5) Assume the real interest rate is currently 5.5% and the inflation rate is 4.0%. Solve...
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.
show work 37) If the expected inflation rate was 2.5%, the expected real interest rate was...
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37) If the expected inflation rate was 2.5%, the expected real interest rate was 4.0%, and the real interest rate turned out to be 5.1%, then the nominal interest rate equals A) 1.4%. B) 1.5%. C) 2.6%. D) 6.5%.
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...
Suppose the real interest rate is 3% and expected inflation is 3%, what is the nominal...
Suppose the real interest rate is 3% and expected inflation is 3%. What is the nominal interest rate?nominal interest rate: = _______ %All else equal, if inflation decreases by 0 %, what will happen to the nominal interest rate?The real interest rate will decrease by 0 %.The nominal interest rate will decrease by 0 %.The nominal interest rate will increase by 0 %.The real interest rate will increase by 0 %.What do economists call the relationship between the nominal interest...
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...
According to the Fisher equation, the real interest rate is given by a zero. b. the...
According to the Fisher equation, the real interest rate is given by a zero. b. the nominal interest rate plus the rate of inflation c. the nominal interest rate minus the rate of unemployment. d. the rate of economic growth. e. the nominal interest rate minus the rate of inflation An implication of sticky inflation is that, through monetary policy changes, the Federal Reserve a. has no impact on inflation b. can alter the real interest rate in the long...
1) If an economy has a horizontal Phillips curve and experiences a recession, inflation: a. falls....
1) If an economy has a horizontal Phillips curve and experiences a recession, inflation: a. falls. b.does not change. c.rises sharply. d.rises, but not very much. e.falls sharply. 2)According to the Phillips curve, in general during an expansion a.inflation rises. b.inflation falls. c.unemployment falls. d.inflation is constant. e.prices fall. 3)If prices are flexible (as in the long run) and the Fed lowers the nominal interest rate (ceteris paribus), __________ and, as a result, __________. a.the real interest rate falls; short-run...
a. What is the relationship between real interest rate, nominal interest rate and inflation rate? b....
a. What is the relationship between real interest rate, nominal interest rate and inflation rate? b. What are the reasons for very high nominal interest rates in the 1980s? c. Explain ex-ante real rate and ex-post real rate.
Suppose real GDP is forecasted to grow by 2.93%, the velocity of money has been stable,...
Suppose real GDP is forecasted to grow by 2.93%, the velocity of money has been stable, and the Fed announces an inflation target of 3.90%. What is the largest money growth rate the Fed could implement and still achieve its inflation target? Now suppose there is a mid-year revision of the GDP forecast that lowers the expected growth rate below 2.93%. Ceteris paribus, what impact will this lower growth rate have on the rate of inflation? Inflation can be either...
If the nominal interest rate is 7.5 percent and the inflation rate is 4.0 percent, what...
If the nominal interest rate is 7.5 percent and the inflation rate is 4.0 percent, what is the real interest rate?
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37) If the expected inflation rate was 2.5%, the expected real interest rate was 4.0%, and the real interest rate turned out to be 5.1%, then the nominal interest rate equals A) 1.4%. B) 1.5%. C) 2.6%. D) 6.5%.
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...
According to the Fisher equation, the real interest rate is given by a zero. b. the nominal interest rate plus the rate of inflation c. the nominal interest rate minus the rate of unemployment. d. the rate of economic growth. e. the nominal interest rate minus the rate of inflation An implication of sticky inflation is that, through monetary policy changes, the Federal Reserve a. has no impact on inflation b. can alter the real interest rate in the long...
a. What is the relationship between real interest rate, nominal interest rate and inflation rate? b. What are the reasons for very high nominal interest rates in the 1980s? c. Explain ex-ante real rate and ex-post real rate.
Suppose real GDP is forecasted to grow by 2.93%, the velocity of money has been stable, and the Fed announces an inflation target of 3.90%. What is the largest money growth rate the Fed could implement and still achieve its inflation target? Now suppose there is a mid-year revision of the GDP forecast that lowers the expected growth rate below 2.93%. Ceteris paribus, what impact will this lower growth rate have on the rate of inflation? Inflation can be either...
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