Question 7 If the nominal interest rate is 2%, and if prices decrease by 1%, then the real rate of interest is approximately: a) 1% b) 2% c) 3% d) 4% e) None of the above.
Question 7 If the nominal interest rate is 2%, and if prices decrease by 1%, then the real rate of interest is approximately: a) 1% b) 2% c) 3% d) 4% e) None of the above.
Homework Answers
Option C is Correct.
According to Fisher, We can calculate real interest rate by Nominal interest rate minus inflation rate. Inflation means percentage increase in general price level. But in this case price level is declining and deflation. In this case real interest rate is nominal interest rate plus percentage decline in general price level. So 2+1 = 3
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Question 7 If the nominal interest rate is 2%, and if prices decrease by 1%, then the real rate of interest is approximately: a) 1% b) 2% c) 3% d) 4% e) None of the above.
C. a higher tax on corporate profits D. none of the above. 19. If the nominal...
C. a higher tax on corporate profits D. none of the above. 19. If the nominal interest rate is 5% and the real interest rate is 2%, a lender will _in terms of purchasing power over a year if she lends at these terms. 2 A. lose 3% B. lose 2% C. gain 2% D. gain 3% 20. Which of the following would lead to lower interest rates? A. households receive news that makes them believe that their incomes will...
If the nominal interest rate is 2% and the real interest rate is 1%, inflation is:...
If the nominal interest rate is 2% and the real interest rate is 1%, inflation is:A. -1 %.B. 0 %C. 1 %.D. 2 %.
22. Under which of the following assumptions would the nominal interest rate be equal to the...
22. Under which of the following assumptions would the nominal interest rate be equal to the real interest rate? (a) expected inflation is equal to the nominal interest rate (b) expected inflation is equal to the real interest rate (c) expected inflation is negative (d) expected inflation is equal to zero (e) none of the above 23. If the nominal interest rate is less than the real interest rate, we know that (a) both the nominal or real interest rate...
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.
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...
Higie a. real rate b. nominal rate C. risk-free rate d. prime rate Sae. inflation rate...
Higie a. real rate b. nominal rate C. risk-free rate d. prime rate Sae. inflation rate 3. Which of the following describes the observed or stated interest rate? a. real rate b. nominal rate c. risk-free rate d. prime rate e. inflation rate
If the nominal interest rate is 7 percent and the real interest rate is 2 perscent...
If the nominal interest rate is 7 percent and the real interest rate is 2 perscent then what is the inflation rate
E) none of the above un equilibrium occurs les intersect. 26. In the Keynesian model, short-run...
E) none of the above un equilibrium occurs les intersect. 26. In the Keynesian model, short-run egun A) where the IS and LA curves intersect. Where the IS curve. Meurve. and FE lines inters C) where the IS curve intersects the FB fine. D) where the LM curve intersects the Fence he money supply will cause 27 In the Keynesian model in the short A) a decrease in output and an increase in the real B) an increase in the...
If a country had deflation of 2 percent while the nominal interest rate increased by 1...
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1. What is the relationship between real interest rate, nominal interest rate and inflation rate? 2....
1. What is the relationship between real interest rate, nominal interest rate and inflation rate? 2. What are the reasons for very high nominal interest rates in the 1980s? 3. Someone buys a 5 year government treasury bond at $P t a. Can the price be above face value? Why? b. Can the price be below face value? Why? c. If he/she wants to sell it after 2 years, will he/she makes a positive rate of return or negative rate...
C. a higher tax on corporate profits D. none of the above. 19. If the nominal interest rate is 5% and the real interest rate is 2%, a lender will _in terms of purchasing power over a year if she lends at these terms. 2 A. lose 3% B. lose 2% C. gain 2% D. gain 3% 20. Which of the following would lead to lower interest rates? A. households receive news that makes them believe that their incomes will...
22. Under which of the following assumptions would the nominal interest rate be equal to the real interest rate? (a) expected inflation is equal to the nominal interest rate (b) expected inflation is equal to the real interest rate (c) expected inflation is negative (d) expected inflation is equal to zero (e) none of the above 23. If the nominal interest rate is less than the real interest rate, we know that (a) both the nominal or real interest rate...
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E) none of the above un equilibrium occurs les intersect. 26. In the Keynesian model, short-run egun A) where the IS and LA curves intersect. Where the IS curve. Meurve. and FE lines inters C) where the IS curve intersects the FB fine. D) where the LM curve intersects the Fence he money supply will cause 27 In the Keynesian model in the short A) a decrease in output and an increase in the real B) an increase in the...
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