Suppose the real interest rate is 4%.
a. If people expect prices to rise by 7%, what would be the nominal interest rate for loans?
%____
b. Now suppose the nominal interest rate for loans increases to 10%. What would people expect the inflation rate to be?
%_____
c. As expected inflation increases, nominal interest rates in the economy will: increase /remain the same/ decrease.??
Suppose the real interest rate is 4%.
a. If people expect prices to rise by 7%, what would be the nominal interest rate for loans?
%____
b. Now suppose the nominal interest rate for loans increases to 10%. What would people expect the inflation rate to be?
%_____
c. As expected inflation increases, nominal interest rates in the economy will: increase /remain the same/ decrease.??
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Related questions
A perceived permanent rise in the rate of money growth will cause what long-run effects in the economy?
| A. |
a rise in the nominal rate of interest and a rise in real GDP by the same percentage |
|
| B. |
a fall in the nominal rate of interest and a rise in inflation by the same percentage |
|
| C. |
a fall in the nominal rate of interest and a fall in real GDP by the same percentage |
|
| D. |
a rise in the nominal rate of interest and a rise in inflation by the same percentage |
