1) If the expected inflation rate is negative A) the real interest rate is less than the nominal interest rate. B) the real interest rate is negative. c) the real interest rate is greater than the nominal interest rate. D) the nominal interest rate must be equal to the real interest rate. 8) none of the above

1) If the expected inflation rate is negative A) the real interest rate is less than the nominal interest rate. B) the real interest rate is negative. c) the real interest rate is greater than the nominal interest rate. D) the nominal interest rate must be equal to the real interest rate. 8) none of the above

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter13: Inflation

Section: Chapter Questions

Problem 10SQ

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Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time payment of 20,000. However, if the inflation rate is 6 per year, how much buying power will that 20,000 have when measured in todays dollars? Hint: Start by calculating the rise in the price level over the 16 years.
Assuming the nominal interest rate is positive, ceteris paribus, which of the following statements is correct? a. If the nominal interest rate is 4 percent and the inflation rate is 3 percent, then the real interest rate is 7 percent. b. When the inflation rate is positive, ceteris paribus, the real interest rate will be less than the nominal interest rate. c. When the inflation rate is zero, ceteris paribus, the nominal interest rate will be less than the real interest rate. d. If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real interest rate is -3 percent.
If the real interest rate is 6% and the inflation rate is 12%, then the nominal interest rate equals a) 2%. b) 0.5%. c) 6%. d) 36%.
Assume that the economy has an annual inflation rate of 5 percent. Are the following investments profitable in real terms? You do not need to explain your answer. (a) A$1,000 face-value bond, which you purchase at a 30% discount, that pays a monthly coupon of$4. (b) A$1 million house the increases in price by$45,000 per year. You do not rent out the house, nor do you undertake renovations. (c) A$1 million house that you renovate for$45,000 over the course of a year, causing the price to increase to$1.1 million. (d) The spot price of silver is$31 per ounce. You purchase 50 ounces of silver for$1,600, in order to compensate the merchant. Over the year, the spot price of silver rises to$34per ounce, and you are able to sell the silver you have at the spot price. (e) You purchase a Non-Fungible Token (NFT) for$98 million. The following year, you are able to sell it for$102.5 million
Suppose you have $400 and the inflation rate is 4 percent. In order to earn a real return of $20 on your investment, the nominal interest rate must be OA. 1 percent. B. 5 percent. C. 9 percent. D. 12 percent. ...
If the nominal rate of interest is 5 percent for a bond issued by the United States Government and the inflation rate is 2 percent, the real rate of interest is ___. The nominal rate of interest will _______ if the inflation rate rises or increases to 6 percent (that is, the inflation rate increases by 4 percent). A. unknown; rise by 4 percent B. 3 percent; rise by 4 percent C. 3 percent; fall by 4 percent D. 7 percent; fall by 4 percent
If the inflation rate is 2 percent and the real interest rate is 4 percent, the nominal interest rate is Multiple Choice 6 percent. 2 percent. 0 percent. 4 percent.
The nominal interest rate will be less than the real interest rate when A. the rate of inflation is positive but decreasing. B. the real interest rate is negative. C. the rate of inflation is negative (that is, deflation) D. the rate of inflation is positive and increasing.