If the nominal interest rate is 10 percent and the inflation rate is 3 percent, then the real interest rate equals: O a. 7 percent. b. 3 percent. O c. 13 percent. Od. 10 percent.
Q: Suppose a workers' union managed to sign a new wage contract with the employer for a 5% nominal wage…
A: Here, it is given that the workers' union signed a contract with employer to have a 5% increase in…
Q: Yvonne takes out a fixed-interest-rate loan and then inflation turns out to be higher than she had…
A: Hi! Thank you for the question but as per the guidelines, We’ll answer the first question since the…
Q: The two-year interest rate is 14.0% and the expected annual inflation rate is 7.0%. a.What is…
A: Nominal interest rate= 14% Rate of inflation= 7% a) Expected real interest rate
Q: Which of the following will NOT cause inflation to increase in home country? O An increase in the…
A: inflation is the pace of increase in costs over a given timeframe. inflation is normally a wide…
Q: difference between real and nominal intrest rates. Can intrest rates ever be negative
A: Interest rate is the rate at which the money is borrowed from the lenders. It is calculated by…
Q: If all wages, salaries, welfare benefits, and other sources of income were indexed to inflation, O…
A: Inflation refers to a persistent increase in prices which reduces the purchasing power of an…
Q: Which of the following statements is CORRECT? O a. The real interest rate is equal to the nominal…
A: Answer is given below
Q: 7) Suppose that the consumer price index (CPI) was 160 in 2004 and 166 in 2005, inflation during…
A: Inflation rate = ∆ in consumer price index / base year's consumer price index × 100
Q: Suppose that the nominal interest rate is 6 percent and the inflation premium is 1 percent.…
A: Real interest rate excludes the effect of inflation.
Q: An economy is comprised of only two goods. Using 2019 and the base year, what is the rate of…
A: Inflation rate=(price of 2020×quantity of 2019)-(price of 2019×quantity of 2019)(price of…
Q: Why is deflation or disinflation an economic problem? O a. All of the answers are correct Ob. It…
A: The correct option is b.
Q: Which of these statements is true about inflation? O a. It shows changes in the general prices of…
A: "Since you have asked multiple questions, we will solve first question for you .. If you want any…
Q: in 2018, expected inflation exceeded inflation. In 2019, inflation exceeded expected inflation.…
A: Inflation refers to as continuous increase in price level in the economy. Real interest rate refers…
Q: QUESTION 10 In which of the following cases would real income rise? O a. Nominal income rises by 8…
A: Meaning of Gross Domestic Product (GDP): The term gross domestic product refers to the situation…
Q: ee is $4. 1. The money supply per person is $2000. What is the value of the nominal interest rate?…
A: Calculation interest rate of equilibrium:- Formula is :- TC = (I*Y/2N) + F*N Here, Total Cost = F*i…
Q: Let CPI, represent CPI in period t and let CPI₁+1 represent the CPI in period t + 1. CPI inflation…
A: Note:- Since we can only answer one question at a time, we'll answer the first one. Please repost…
Q: Suppose the CPI was 110 last year and is 121 this year. Instructions: In part a enter your answer…
A: Inflation: It refers to the rise in the general price level over a period of time.Deflation: It…
Q: Which of the following correctly shows the steps needed to calculate the inflation rate? O Tally up…
A: The inflation rate is basically an increase in the price level from one period to another. If the…
Q: What is the change in unemployment when the price level and the money wage rate rise by the same…
A: The average of existing prices over the entire range of goods and services generated in an economy…
Q: Suppose that the nominal interest rate is 4 percent and the inflation premium is 2 percent.…
A: Nominal interest rate = Real interest rate + Inflation rate
Q: lestion o Assume that wages are perfectly indexed in an economy. If the economy has inflation, which…
A: Answer in step 2
Q: Question 8 In which situation is the real interest rate lowest? O The nominal interest rate is 8%…
A: The real interest rate of a bond or loan is calculated by adjusting the actual interest rate to…
Q: Ceteris paribus, if the real interest rate is 1 percent and the nominal interest rate is 3 percent,…
A: The relationship between nominal interest rate and real interest rate is that Real interest rate =…
Q: Complete the following table by computing the percentage change in price for each of the three…
A: Consumer Price Index Inflation (CPI Inflation) measures the % change in the price range of certain…
Q: O l 45 l 14% È 07:27 www.bartleby.com/solution-ar C = bartleby Q&A Business / Economics / Principles…
A: The consumer price index (CPI), measures the average level of prices of the basket of goods and…
Q: Assume that next year’s wage rate will be 3 percent higher than this year’s because of inflationary…
A: 1. Real Wage Rate= Nominal wage rate- Inflation = (3-4)%…
Q: Why is the PCE deflator a preferred measure of consumer prices over the CPI? O the PCE data is…
A: Personal Consumption Expenditure deflator (PCE Deflator) is preferred measure of consumer prices…
Q: Which of the following is/are true? Real GDP 1. The GDP deflator is given by. Nomínal GDP * 100- II.…
A: NOTE: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…
Q: In 2018, expected inflation exceeded inflation. In 2019, inflation exceeded expected inflation.…
A: Answer: Correct option: option (d). Explanation: There is an inverse relationship between the…
Q: unexpected inflation is better for whom and why? O If you are a lender, because it reduces the value…
A: Inflation is the increase in average price level of goods and services produced in the economy.
Q: When inflation occurs, each dollar of income will buy more output than before. O all prices of all…
A: Inflation occurs when there is a rise in the general price level of goods and services.
Q: What is the difference between nominal and real interest rates? O A. The nominal interest rate is…
A: Answer: Correct option: E (A and C only) Explanation: Option A is correct because nominal interest…
Q: Sheamous loses his job and decides to sit on the beach rather than look for work during the next few…
A: The unemployment rate is the proportion of the labor force that is not currently employed but are…
Q: The interest rate on Real Return Bonds is a direct measure of Select one: O a. the rate of deflation…
A: Real interest bonds in economics are basically known to be as the government bonds which are…
Q: f the real value of an item bought ten years ago is less than it’s nominal value at that time, what…
A: The nominal value of an item is adjusted for inflation, and its actual worth is measured in terms of…
Q: In Germany, banks are paying a positive interest rate on peoples' savings, as a result O a. Savers…
A: Lower rates of interest discourage people from making savings while higher rates of interest…
Q: Becky and her employer both expected inflation to be 4% between 2012 and 2013, so they agreed, in a…
A: Nominal wage = Real wage + Inflation rate
Q: If the nominal interest rate is a constant 15 percent and anticipāted iniflation falls from 10…
A:
Q: In the Okun's Law equation u - Ut-1 = -0.4(g,y - 3%), for the unemployment rate to fall by 2%,…
A: Given: The Okun's law equation is: ut - ut - 1 = -0.4gy - 3% The unemployment rate falls by = 2% To…
Q: Which of the following does not influence the rate of inflation? O a. The number of people affected…
A: Inflation is the general increase the overall price level in an economy during the period of time.
Q: (Please 2 answer s) Question 27 : Consider tablets which are used by a majority of consumers.…
A: 27. Since the number of function available with the tablets have increased but the prices of the…
Q: When economists speak of the CPI bias, they are referring to O A. the tendency for the CPI to…
A: Consumer Price Index shows the weighted average value of a basket of goods. CPI calculated by the…
Q: If the nominal wage is higher than real wage, it should be that O Prices are increasing and then…
A: Nominal wages are wages expressed in a monetary form while real wages are adjusted for inflation.
Q: Suppose that a borrower and a lender agree on the nominal interest rateto be paid on a loan. Then…
A: The substantial increase in the price level refers to as the inflation rate. A high inflation rate…
Q: Suppose that in year 1, Acme Corporation can make a real (inflation-adjusted) return on an…
A: Since you have posted multiple questions, we will solve the first answer for you. If you want any…
Q: Which of the following describes the interest rate on an investment after calculating the impact of…
A: Interest rate is key determinant of investment. The change in the interest rate affects the decision…
Q: 12) If the nominal rate of interest is 2 percent, and the expected inflation rate is minus 12…
A: The inflation rate is the rate of increase in the prices of products and services manufactured in an…
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- Let's assume that Enrique borrows $420,000 from the Bank of America and let's assume that the interest rate on this loan is fixed at 9%. If the current inflation is 6%, then the real interest rate in percentage is:Assume that next year’s wage rate will be 3 percent higher than this year’s because of inflationary expectations. The actual inflation rate is 4 percent. At the beginning of next year, will the real wage be higher, lower, or the same as today? Explain. Assume that Mark gets a fixed-rate loan from a bank when the expected inflation rate is 3 percent. If the actual inflation rate turns out to be 4 percent, who benefits from the unexpected inflation: Mark, the bank, neither, or both? Explain. How does each of the following changes affect the real gross domestic product and price level of an open economy in the short run? Explain. The depreciation of the country’s currency in the foreign exchange market.Suppose that at the start of 1999, Ari invests their money in a savings account earning 3.6% interest. If inflation is 1% during 1999, calculate the real interest rate on Ari’s savings account by the end of 1999. Has the inflation-adjusted value of Ari’s savings increased or decreased?
- For each of the annual inflation rates given in the following table, first determine the new price of a comic book, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Eileen's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest comic book. For example, if you find that the deposit will cover 20.7 comic books, you would round the purchasing power down to 20 comic books under the assumption that Eileen will not buy seven-tenths of a comic book.Suppose that the nominal rate of interest is 6 percent and the inflation premium is 1 percent. What is the real interest rate? % Alternatively, assume that the real interest rate is 3 percent and the nominal interest rate is 8 percent. What is the inflation premium? %Suppose that a borrower and a lender agree on the nominal interest rateto be paid on a loan. Then inflation turns out to be higher than they bothexpected.a. Is the real Interest rate on this loan higher or lower than expected?b. Does the lender gain or lose from this unexpectedly high inflation?Does the borrower gain or lose?c. Inflation during the 1970s was much higher than most people hadexpected when the decade began. How did this affect homeowners whoobtained fixed-rate mortgages during the 1960s? How did it affect thebanks that lent the money?To find additional study resources, visit cengagebrain.com, and searchfor "Mankiw."
- Assume that the real rate of interest is 5 percent and a lender charges a nominal interest rateof 15 percent. If a borrower expects that the rate of inflation next year will be 10 percent andthe actual rate of inflation next year is 10 percent, Group of answer choices the lender benefits from inflation, while the borrower loses from inflation. the borrower benefits from inflation, while the lender loses from inflation. neither the borrower nor the lender benefits from inflation. both the borrower and the lender lose from inflation.The CPI is more commonly used as a gauge of inflation than the GDP deflator is becaust the O a. GDP deflator cannot be used to gauge inflation. O b. CPI is easier to measure. O c. CPI better reflects the goods and services bought by consumers. O d. CPI includes more goods and services that the GDP deflator does. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.(Please 2 answer s) Question 27 : Consider tablets which are used by a majority of consumers. Suppose that due to the development of 5G technology, tablets underwent a major advance from 2020 to 2021 in terms of the number of functions they could do. The tablets in 2021 sold at the same price as those in 2020. Which of the following would tend to increase in 2021 as a result of this major advance? Select only one : O CPI O Purchasing power of money O GDP deflator O None of the above Question 28 : Suppose a country enters a major recession where the number of unemployed increases a lot and the wages of jobs fall a lot. Assuming no other major changes, what would be the effect of this change on a country's CPI? Select only one : O Increase O Decrease O Stays the same O Unclear
- 13. Which of the following cannot be used to measure inflation?a) GDP deflationb) Expenditure methodc) Producer price indexd) Consumer price indexWhich of the following equations in correct?a) Nominal interest rate = Real interest rate-Inflationb) Real interest rate = Nominal interest rate + inflationc) Real interest rate = Nominal interest rate x inflationd) Real interest rate = Nominal interest rate-inflationSuppose I lend my friend Peter $100 for one year, and he agrees to repay me with interest. We each have an expectation that the inflation rate over the coming year will be 5 percent, and so we agree that he will pay me back at a nominal rate of 7 percent interest. a) What real rate of return do I expect to receive? b) What happens if inflation turns out to be 8 percent over the year? Who is made better off and who is made worse off? c) What happens if inflation turns out to be 3 percent over the year? Who is made better off and who is made worse off?In what situation would the expected real interest rate be negative? O The nominal interest rate is less than the expected inflation rate. O The nominal interest rate is greater than the real interest rate. O The expected inflation rate is greater than the actual inflation rate. O The expected real interest is greater than the expected inflation rate. O The actual inflation rate is greater than the nominal interest rate. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.