Consider the figure below
The figure depicts the trends in the nominal and real interest rates. You do not need to assume that there is a zero lower bound on nominal rates. Suppose you are told that the top (pink) trend line is the nominal interest rate. It would generally be true that this economy exhibits
inflation |
deflation |
neither inflation nor deflation |
Real interest rate = Nominal interest rate - Inflation rate
Initially the difference between real interest rate and nominal interest rate was large this shows that high inflation rate was exhibited by the economy and it is confirmed by the higher interest rate. As we know higher the inflation rate higher will be the interest rate.
Gradually with the passage of time the gap between the nominal and real interest rate declined in other words the inflation declined.
Now, the nominal interest rate is approximately equal to zero and real interest rate is negative thus it means that still inflation is present in the economy.
Here if we don't assume the zero lower bound on nominal interest rate then one of the cause of negative real interest rate may be that inflation rate is higher than the nominal interest rate. For example Nominal interest rate is 6.25% and inflation rate is 8.5%.
Then Real interest rate = 6.25 - 8.5 = - 2.25%
Thus, it may be an economy that exhibits inflation.
The given scenario is not of deflation since it is opposite of inflation therefore,
Real interest rate = Nominal interest rate + Deflation rate
That is the real rate will be higher than the nominal interest rate but nowhere along the trend line real interest rate goes above the nominal interest rate.
Answer is Inflation
Please contact if having any query thank you.
Consider the figure below The figure depicts the trends in the nominal and real interest rates....
Consider the figure below The figure depicts the trends in the nominal and real interest rates. You do not need to assume that there is a zero lower bound on nominal rates. Suppose you are told that the top (pink) trend line is the real interest rate. It would generally be true that this economy exhibits deflation inflation constant price levels 14 12 10 レ、 8 6 Q. 4 2 -2 78 80 82 84 86 88 90 92 94...
Consider the figure below The figure depicts the trends in the nominal and real interest rates. Suppose you are told that the top (pink) trend line is the nominal interest rate. During which of the following periods did this economy experience deflation? The economy did not experience deflation in any period The economy experience deflation from 08 to 14 The economy experience deflation from 78 to 82 The economy experience deflation from 82 to 84 14 12 10 レ、 8...
2 Understanding and Calculating Inflation Real and Nominal Interest Rates in the United States, 1960-2015 Percent 16 14 Nominal Real 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Year Figure 2: Real and nominal interest rates in the US, 1960-2015 1. State the Fisher equation. What do the three variables in Fisher's equation represent? 2. Consider Figure 2. Why do negative real interest rates occur? Are they a problem for the economy? 3. In Figure 2,...
Please show how you did this in excel. :13-19 Every home football game for the past eight years at Eastern State University has been sold out. The revenues from ticket sales are significant, but the sale of food, beverages, and souvenirs has contrib- uted greatly to the overall profitability of the football program. One particular souvenir is the football pro- gram for each game. The number of programs sold at each game is described by the following probabil- ity distribution:...
please show all work and explain here is the data and explanation of 12.4 here is appendix D 12.12. * In Problem 12.4, find the value of x2. If the dice really are true, what is the probability of getting a value of X2this large or larger? Explain whether the evidence suggests the dice are loaded. (See Appendix D for the necessary probabili- ties.) 12.4.I throw three dice together a total of 400 times, record the number of sixes in...
Need help with C++ assignment Assignment 1 and .txt files are provided at the bottom. PART A PART B Assignment 1 #include <iostream> #include <string> #include <fstream> #include <iomanip> #include <stdio.h> #include <ctype.h> #include <string.h> #include <algorithm> using namespace std; /** This structure is to store the date and it has three integer fields **/ struct Date{ int day; int month; int year; }; /** This structure is to store the size of the box and it...
Question 24. Bank queues bing, Exploring, and Comparing Data 23. Pulse Rates Listed below are pulse rates (beats per minute) from samples of adult males and females (from Data Set 1 "Body Data" in Appendix B). Does there appear to be a difference Male: 86 72 64 72 72 54 66 56 80 72 64 64 96 58 66 Female: 64 84 82 70 74 86 90 88 90 90 94 68 90 82 80 24. Bank Queues Waiting times...
Answer the following fundamental questions for each time series (exercise 1-10): i. What is measured? (definition of the time series) ii. How is it measured? (measurement units) iii. What is the periodicity? (frequency of the series) iv. What are the dominant features of the time series? (trends, non-seasonal cycles, seasonal cycles) We were unable to transcribe this image18 CHAPTER 1 Introduction and Context FIGURE E.2 Saving Rate (%). Monthly Data 1988/ ,m/i 01-2008/02 4 0 -2 01-88 01-90 01-92 01-94...
33 On May 6, Jim Ryan borrowed $14,000 from Lane Bank at 7 % interest. Jim plans to repay the loan on March 11. Assume the loan is on ordinary interest. How much will Jim repay on March 11? (Use Days in a year table) (Round your answer to the nearest cent.) Jm repay etbook 7-1 TABLE Exact days-in-a-year calendar (excluding leap year)" Day of month 30 31 30 31 28 31 30 31 31 30 31 31 Dec Mar...
Data is copied below for ease of use. 92 1 123 115 978 31 6310 10.4 75.2 0 128 128 934 51 6270 11.6 121.9 0 113 105 985 78 6260 10.8 74.2 0 74 67 984 34 5570 10.8 44.8 1 47 44 962 22 2880 8.9 120.8 0 87 83 953 43 5130 9.6 96 0 78 73 1038 7 5400 11.6 50.2 0 63 57 984 14 4860 11.6 200 0 160 143 1071 3 6740 12.1...