Dean borrows $400 from Tim. Tim wants to make a 7% real return on his money, so they both agree on a 7% stated interest rate paid next year. Dean and Tim did not anticipate any inflation, yet the actual inflation turned out to be 2% next year. In this case, what is Tim’s real rate of return?
Dean borrows $400 from Tim. Tim wants to make a 7% real return on his money, so they both agree on a 7% stated interest rate paid next year. Dean and Tim did not anticipate any inflation, yet the actual inflation turned out to be 2% next year. In this case, what is Tim’s real rate of return?
Chapter13: Inflation
Section: Chapter Questions
Problem 10SQ
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Dean borrows $400 from Tim. Tim wants to make a 7% real return on his money, so they both agree on a 7% stated interest rate paid next year. Dean and Tim did not anticipate any inflation, yet the actual inflation turned out to be 2% next year. In this case, what is Tim’s real
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