PSY 3010 Lecture Notes - Lecture 13: Nominal Interest Rate, Real Interest Rate, Unemployment
Document Summary
Chapter 7: everybody that currently has a job and some of the people that do not currently have a job. I think that the definition of the labor force is everybody that is capable of working. No, because in a dynamic economy frictional unemployment will always be present. No, because in a dynamic economy structural unemployment will always be present. No it would not be keeping up with the current cost of living: real interest rate= nominal interest rate rate of inflation. With a higher inflation rate the debtor will actually be paying less than with a lower inflation rate: the creditors can increase the rate if the inflation unexpectedly changes. With a fixed rate they cannot change it at all and they could end up losing money: there is a regular cycle in the business cycle but you do not know when the market will rise or fall.
