Question Suppose an increase in productivity increases nominal GDP by 8% and inflation is -3%. (.e....

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Answer 1

Answer #1

1 + nominal rate = (1+real rate) (1+inflation rate)

1+.08 = (1+real rate) ( 1-.03)

1.08/.97 = (1+real rate)

1.113402 - 1 = real rate

real rate = .113402 or 11.3402%

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Answer 2

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