Answered: --> In an economy, The inflation rate…

--> In an economy, The inflation rate is 6%. At this situation a person takes a loan at 13% interest rate. What's the actual interest rate that the bank would get?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 9SCQ: How should an increase in inflation affect the interest rate on an adjustable-rate mortgage?

See similar textbooks

Related questions

Q: 8 - What does a fall in inflation mean? A) Increasing the level of well-being B) falling prices…

A: The rate of increase in the level of prices or an increase in the cost of living over a specified…

Q: he inflation rate is the... a) Monthly percentage rate increase in the price of all goods and…

A: Macroeconomics refers to the branch of economics dealing with the behavior, performance, structure,…

Q: 76. Ionnis puts money in the bank and earns a 7 percent nominal interest rate. What happens if the…

A: Inflation rate: - it is the rate of increase in the prices of goods and services in an economy.

Q: 1. Supposed you want to deposit 1000 pesos mothly in the bank for 20 years, The bank only gives 2%…

A: Given information: Monthly deposits (A): 1000 pesos Periodic Interest rate (i): 0.02/12=0.00167…

Q: 7. Interest, inflation, and purchasing power Suppose Susan is an avid reader and buys only comic…

A: The interest rate which is being adjusted for inflation is known as the real interest rate. It…

Q: 5. Interest, inflation, and purchasing power Suppose Kate is a cinephile and buys only movie…

A: Initially, The purchasing power of kate 1000 $ deposit is 100 Movie tickets(1000/10) When…

Q: It is the increase in the prices for goods and services from one year to another, thus decreasing…

A: Inflation rate is the rate at which the prices of goods and services in an economy rise over time.…

Q: (1-3) Spartanville is a small country off the coast of Western Canada that relies heavily on the…

A: Inflation: Inflation refers to the situation where the general price level in an economy have…

Q: 1. Calculate the inflation rate for 2007-2008: 2008-2009: 2014-2015: 2015-2016:

A: here we calculate the inflation rate of the following years which are as follow-

Q: The implied real interest rate of 3-month Treasury bills (U.S. government debt of 3-month maturity)…

A: We know, nominal interest rate = Real interest rate + inflation rate

Q: 8. Interest, inflation, and purchasing power Suppose Yvette is a cinephile and buys only movie…

A: Yvette deposits $1000 and earns 5% interest on deposits. Initially she has $1000 to spend on movie…

Q: Creditors and debtors tend to lose during an inflationary period since: (1) The nominal interest…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: If you are looking for a 4% real return (inflation-free interest) on your investment, would you be…

A: The nominal interest rate can be calculated as follows: Thus, the nominal interest rate is 9.2%

Q: The...... rate is equal to the ..... rate.....the......rate a) real interest / nominal interest /…

A: The question is based on the Fisher equation which states the relationship between real interest…

Q: Explain what researchers have found on the costs and benefits of inflation?

A: Inflation is defined as the increase in the prices of goods and services in the economy over a…

Q: Define and describe the relationships between the following: actual and real dollars, inflation, and…

A: Actual dollars are simply means what you spend. They measure the actual cost of things in an…

Q: As a manager of a firm, you are concerned about the rise of inflation rate from 3 to 5 percent…

A: Since independence, Malaysia's economy has been hit by a number of internal and external shocks.…

Q: 5. Interest, inflation, and purchasing power Suppose Frances is an avid reader and buys only mystery…

A: Using the following formulae: Purchasing power = Deposits/ Price Real interest rate = nominal…

Q: 26. Suppose the same consumer market basket that cost $20 on January 1, 1990, costs $40 on Dec 31,…

A: Given: The cost of a consumer market basket on January 1, 1990, is = $20 The cost of a consumer…

Q: Joao wants to earn a real annual interest rate on his investment of at least 8%. If the annual rate…

A: Jao wants to earn minimum real rate of return on his investment which is called minimum acceptable…

Q: 29. Saving requires interest rates to be sufficiently high to prevent free riders. savers to be paid…

A: Saving refers to the portion of current income for future use or the flow of resources accumulated…

Q: Suppose real GDP is growing at a rate of 3%, and money supply is growing at 6%. What is the…

A: Answer; Answer = 3percentage

Q: MCQS 1) The nominal interest rate is: a. not adjusted for current economic conditions b. adjusted…

A: 1) Real interest rate=Nominal interest rate-Inflation rateThus,Nominal interest rate=Real interest…

Q: 1. Consider a real return bond with a face value of $15,000 and a coupon yield of 5.2%. What is the…

A: The nominal or ostensible yield to be paid by the issuer on the bond at the time of issue is known…

Q: f you deposit $10,000 in a bank account that pays a 2% interest compounded monthly for five years,…

A: Deposit = 10,000 Interest rate = 2% compound monthly Time period = 5 years Inflation Rate = 5%

Q: 1. Calculate the inflation rate for 2007-2008: 2008–2009: 2014-2015:

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Q: Suppose the bank deposit has 30% annual interest rate. It implies that the purchasing power of…

A: Given, Interest rate = 30%

Q: Question 4: (Effect of Inflation) If a small company invests 200,000 in a new production line…

A: Here we calculate the amount company receive with different interest rate by using the given…

Q: 5. Interest, inflation, and purchasing power Suppose Frances is an avid reader and buys only mystery…

A: If purchasing power of ‘Fr’ is $2,000, then the deposit can be calculated as follows:

Q: Engineering Economics ! Define the following and give 2 examples each ! 1. Simple Interest 2. Cash…

A: 1. Simple interest is a speedy and simple technique for working out the interest charge on a credit…

Q: Required information In wisely planning for your retirement, you invest $18,000 per year for 20…

A: Answer; First finding Nominal interest rate : Nominal interest rate = [ ( 1+ real interest…

Q: 10. If the inflation rate in one year is 18%, what is the corresponding decrease in the buying power…

A: In an economy, purchasing power refers to the actual worthiness of money at the marketplace that can…

Q: Assume you just deposited $1,000 into a bank account. The current real interest rate is 2%, and…

A: The relation b/w the nominal & real interest rate, as well as inflation, is represented by the…

Q: 1-)The rate is equal to the the rate rate .... ......... Please select one or more option; a) real…

A: 1.Real interest rate accounts for inflation therefore answer is Real interest rate=nominal interest…

Q: Suppose that a deceased relative had put $1,000 in an envelope in 1954 and you just discovered this…

A: here we can calculate the following terms as follow

Q: Part A: Return on Investment You are an HR manager responsible for organizing the company's new…

A: ●Donald Kirkpatrick, former Professor Emeritus at the University of Wisconsin, first published his…

Q: Using you answer for Question 2, what will be the price per MMBtu of natural gas on June 30, 2022 if…

A: The price per MMBtu can be calculated by using the following equation. Price per MMBtu= Pi*(1+i)t

Q: xample: Interest rate adjusted for inflation if the market interest rate is 10% and the overall…

A: Given information: The market interest rate is 10%. => Nominal interest rate = 10% -----------…

Q: For a given real interest rate, a decrease in the inflation rate would a. increase the…

A: We know,Real interest rate = Nominal interest rate – inflation rateTherefore, a decrease in…

Q: What role do measures like GDP, unemployment and inflation play in different scenarios?

A: GDP= Gross Domestic Product refers to the value of goods and services that are produced inside the…

Q: Question. Suppose that people expect inflation to equal 3 percent, but in fact prices rise by 5…

A: The inflation is the abnormal increase in the general price level in the economy. When there is…

Q: Shelia earns $12.00 per hour. During her performance review, her boss gave her a $0.35 raise. Is…

A: Given wage = 12 $ per hour increment in wage = 0.35 $ Therefore Percentage growth in wage = 0.35/12…

Q: Assume you make $140,000 a year. The rate of inflation in the last year was 15%. What would your…

A: Inflation refers to the increase in price level. When inflation occurs in an economy, the purchasing…

Q: You and your spouse just adopted twin girls, little Heather and Beth. You want to make sure they are…

A: The value of insurance can be calculated by using the following formula.

Q: Suppose you have $200,000 in a bank term account. You earn 5% interest per annum from this account.…

A: The money in term account = $200,000 Interest rate = 5%

Q: The index number representing the price level changes from 110 to 115 in 2019, and then from 115 to…

A: 1. Given The index number representing the price level changes from 110 to 115 in 2019. Then from…

Question

i need the answer quickly

-> In an economy, The inflation rate is 6%. At this
situation a person takes a loan at 13% interest rate.
What's the actual interest rate that the bank would
get?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Basic concept

VIEW

Working and final answer

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

What is the difference between the price level and the tale of inflation?
A fixed-rate mortgage has the same interest rate over the life of the loan, whether the mortgage is for 15 or 30 years. By contrast, an adjustable-rate mortgage changes with market interest rates over the life of the mortgage. If inflation falls unexpectedly by 3, what would likely happen to a homeowner with an adjustable-rate mortgage?
Given the federal budget deficit in recent years, some economists have argued mat by adjusting Social Security payments for inflation using me CPI, Social Security is warming recipients. What is their argument, and do you agree or disagree with it?
The prime interest rate is the rate that banks charge their best customers. Based on the nominal interest rates and inflation rates in Table 19.10, in which of the years would it have been best to be a lender? Based on the nominal interest rates and inflation rates in Table 19.10, in which of the years given would it have been best to be a borrower?
The index number representing the price level changes from 110 to 115 in one year and then from 115 to 120 the next year. Since the index number increases by five each year, is five inflation rate each year? Is the inflation rate the same each year? Explain your answer.
How should an increase in inflation affect the interest rate on an adjustable-rate mortgage?
Inflation rates, like most statistics, are imperfect measures. Can you identify some ways that the inflation rate for fruit does not perfectly capture the rising price of fruit?
A mortgage 105m is a loan that a person makes to purchase a house. Table 19.11 provides a list of the mortgage interest rate for several different years and the rate of inflation for each of those years. In which years would it have been better to be a person borrowing money from a bank to buy a home? In which years would it have been better to be a bank lending money?