"Suppose inflation rises from 5% to 7%. Then on a loan with a fixed nominal interest...
"Suppose inflation rises from 5% to 7%. Then on a loan with a fixed nominal interest rate of 10%, the real interest rate:"
a. Stays at 10%
b. Goes from 5% to 7%
c. Goes from 5% to 3%.
d. Goes from 15% to 17%
Homework Answers
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"Suppose inflation rises from 5% to 7%. Then on a loan with a
fixed nominal interest...
Suppose that nominal GDP (GDP measured in current dollars) rises by 10% and that inflation is...
Suppose that nominal GDP (GDP measured in current dollars) rises by 10% and that inflation is 5%. Which of the following is true? A. Nominal GDP has decreased. B. Unemployment will rise. C. Real (inflation-adjusted) GDP has decreased. D. Real GDP has increased.
Suppose the nominal interest rate equals 9%, the expected inflation rate is 5%, and actual inflation...
Suppose the nominal interest rate equals 9%, the expected inflation rate is 5%, and actual inflation turns out to be 3%. In this case, the: a. ex ante real interest rate is 4%. b. ex post real interest rate is 4%. C. ex ante real interest rate is 6%. d. ex post real interest rate is 2%
13) suppose that Sally's nominal wage rises from $1,000 per week to $1,400 per week. If...
13) suppose that Sally's nominal wage rises from $1,000 per week to $1,400 per week. If at the same time average prices rise 40%, how much will her real income increase? A) $400 per week B) 40%. C) $200 per week. D) 0%. 14) Suppose nominal GDP increases from $400 billion to $800 billion. If at the same time average prices double, then how much did real GDP increase? A) $0 B) $200 billion. C) $400 billion. D) $800 billion....
17. When the inflation rate rises, the purchasing power of nominal income: a remains unchanged. c....
17. When the inflation rate rises, the purchasing power of nominal income: a remains unchanged. c. increases b. decreases d. changes by the inflation rate minus one. 18. Inflation is defined as an increase in: a real wages of workers. b. real GDP c. the average price level. d. all consumer products. 19. Those hurt by inflation include: a. labor unions with COLA clauses. b. borrowers. savers d. owners of real estate. e owners of precious metals, antiques, and works...
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%....
1 Inflation and interest Suppose you deposit $100 in an account that promises 10% nominal interest....
1 Inflation and interest Suppose you deposit $100 in an account that promises 10% nominal interest. 1. In the next period, how many dollars do you have? 2. If the price level rises from 1 to 1.05. what is the increase in the goods value in the next period, i.e. what is the increase in value using first period dollars. 3. What is the real interest rate? 4. Show how this relates to the Fisher Equation
Real vs. Nominal Interest Rates. Suppose the nominal value of your savings increased from $5000 t...
Real vs. Nominal Interest Rates. Suppose the nominal value of your savings increased from $5000 to $5350 between 2017 and 2018. 5. Calculate the annual nominal idterest rate that you earned on your savings. Suppose the CPl increased from 100 to 102 between 2017 and 2018. What is the growth rate of the real value of your savings? Suppose you had expected the inflation rate to be 1%. Compared to your expectation, are you better off or worse off a....
If the nominal rate on your car loan is 3.95 percent and the rate of inflation...
If the nominal rate on your car loan is 3.95 percent and the rate of inflation is 5.2 percent then the real rate on the loan is negative. Select one: True False Harold goes to the grocery store to buy his month's supply of Coke. As he enters the soft drink section, he notices that the price of Pepsi has been reduced by 25 percent. He buys Pepsi instead of Coke. This represents the substitution bias that is a problem...
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...
3. Suppose you take out a loan for school this year for $4500. The bank expects that the rate of inflation for next...
3. Suppose you take out a loan for school this year for $4500. The bank expects that the rate of inflation for next year will equal 2%. You and the bank agree that in one year's time, you will pay back the full amount at an interest rate of 6%. Next year though, there is a sudden rise in inflation, causing inflation to equals 7%. a. How much will you pay back in one year? b. What is the anticipated...
Suppose the nominal interest rate equals 9%, the expected inflation rate is 5%, and actual inflation turns out to be 3%. In this case, the: a. ex ante real interest rate is 4%. b. ex post real interest rate is 4%. C. ex ante real interest rate is 6%. d. ex post real interest rate is 2%
13) suppose that Sally's nominal wage rises from $1,000 per week to $1,400 per week. If at the same time average prices rise 40%, how much will her real income increase? A) $400 per week B) 40%. C) $200 per week. D) 0%. 14) Suppose nominal GDP increases from $400 billion to $800 billion. If at the same time average prices double, then how much did real GDP increase? A) $0 B) $200 billion. C) $400 billion. D) $800 billion....
17. When the inflation rate rises, the purchasing power of nominal income: a remains unchanged. c. increases b. decreases d. changes by the inflation rate minus one. 18. Inflation is defined as an increase in: a real wages of workers. b. real GDP c. the average price level. d. all consumer products. 19. Those hurt by inflation include: a. labor unions with COLA clauses. b. borrowers. savers d. owners of real estate. e owners of precious metals, antiques, and works...
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%....
1 Inflation and interest Suppose you deposit $100 in an account that promises 10% nominal interest. 1. In the next period, how many dollars do you have? 2. If the price level rises from 1 to 1.05. what is the increase in the goods value in the next period, i.e. what is the increase in value using first period dollars. 3. What is the real interest rate? 4. Show how this relates to the Fisher Equation
Real vs. Nominal Interest Rates. Suppose the nominal value of your savings increased from $5000 to $5350 between 2017 and 2018. 5. Calculate the annual nominal idterest rate that you earned on your savings. Suppose the CPl increased from 100 to 102 between 2017 and 2018. What is the growth rate of the real value of your savings? Suppose you had expected the inflation rate to be 1%. Compared to your expectation, are you better off or worse off a....
3. Suppose you take out a loan for school this year for $4500. The bank expects that the rate of inflation for next year will equal 2%. You and the bank agree that in one year's time, you will pay back the full amount at an interest rate of 6%. Next year though, there is a sudden rise in inflation, causing inflation to equals 7%. a. How much will you pay back in one year? b. What is the anticipated...
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