If the nominal interest rate is a constant 15 percent and anticipāted iniflation falls from 10 percent to 7 percent, the real interest rate would change from Select one: O A. 8 to 5 percent. O B.7 to 9 percent. OC5 to 8 percent. O D.15 to 10 percent.
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: 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: Assuming the nominal interest rate is positive, ceteris paribus, which of the following statements…
A: The interest rate in economics is the amount of payment that a lender charges on a borrower in order…
Q: Deflation is a phenomenon that describes O A. a decrease in the rate of inflation. O B. a very rapid…
A: Option (C) is correct.
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: If the nominal interest rate is 10 percent and the inflation rate is 3 percent, then the real…
A: Real interest rate: - The real interest rate is the inflation-adjusted interest rate. Real interest…
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: Suppose the nominal interest rate is curently 2.4 per cent and expectec inflation is 16 per cent. I…
A: The fisher effect refers to the economic analysis of the relationship between real interest rate,…
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: When inflation is much higher than expected, which of the following is true? Select one: O a. Real…
A: Inflation means the sudden rise in the prices of good and services produced in the economy.…
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: in two years is P2,308. What is th inflation if the real rate of interest is 10%? 18. If the…
A: DISCLAIMER “Since you have asked multiple question, we will solve the first question for you. If…
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: 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: Nominal interest rates differ from real interest rates in that nominal interéšt Pates are Consider…
A: In an economy, the difference between nominal value and real value of an economy variable is…
Q: Marta lends money at a fixed interest rate and then inflation turns out to be higher than sh had…
A: Inflation occurs when prices rise, reducing your dollar's purchasing power. Inflation is defined as…
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: If the price of industrial plastic injection molding machines rose by 20% and the price of oranges…
A: CPI stands for consumer price index. Where consumer goods basket are included to calculate the the…
Q: The CPI overstates inflation because the average consumer buys O A. the same basket of goods every…
A: The CPI overstates inflation because the typical consumer buys... less of these goods whose relative…
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: 8a. Assume the following information. A banker will make a loan to a firm for one year. The real…
A: Real rate of interest (r) = 2% Expected inflation (i) = 3%
Q: The CPI understates true inflation because it does not take into account consumers' ability to…
A: Inflation is the increase in general price levels in an economy from one period to another.…
Q: QUESTION 3 If nominal interest rate increased by 0.2 percentage points and inflation increased by…
A: The relationship between nominal interest rate, real interest rate and inflation rate is as follows:…
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: Rising inflation means O that the price level is rising at a variable rate. that the price level is…
A: Macroeconomics is that branch of economics which is concerned with the study of economy as a whole.…
Q: When the unemployment gap is positive. O AD exceeds full-employment output. O The economy is running…
A: When the unemployment gap is positive, it means that the actual unemployment is higher than the…
Q: Consider an economy that lasts for two periods. A household receives nominal labour income Y1 = 100…
A: In period 1 - Y1 = 100 p1 = 10 Consumption amount = c1 In period 2 - Y2 = 110 p2 = 11…
Q: An increase in the expected inflation rate will lead to a rate for a given nominal interest rate and…
A: The inflation is the increase in the general price level of all goods and services in the economy.…
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: High and uncertain inflation is damaging to the economy because... O a. There can be unexpected…
A: Inflation refers to an increase in the general price level in an economy over a period of time.…
Q: The nominal interest rate is equal to ? (a).Real interest +inflation (b). Real interest *inflation…
A: Answer - "Thank you for submitting the question, We are authorized to answer one question at a time,…
Q: If deflation occurs, and your income is fixed, your real income will: a. fall. b. remain equal to…
A: Real income is the nominal income adjusted for the price change. Real income = (Nominal income /…
Q: Which of the following will most likely cause a change in the natural rate of unemployment?…
A: Unemployment arises when workers who wish to work are unable to do so, resulting in a reduction in…
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: Marta lends money at a fixed interest rate and then inflation turns out to be higher than she had…
A: We know that the real interest rate is equal to nominal interest rate minus inflation rate. Real…
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: 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: If the population of a country is 1,000,000 people, its labor for consists of 500,000, and 40,000…
A: Gradually we can say that unemployment refers to the situation in which actually people are…
Q: If there are only two goods, apples and bikes produced in the economy; in 2015 total production of…
A: Inflation rate = % Change in CPI, where CPI in 2015 = 100 (2015 being base year) CPI in 2016 = (Cost…
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…
Q: If inflation is 4 percent per year and you receive a 3 percent raise in income, then your: a. Real…
A: Nominal wages are the wages received by a worker in the form of money. It is also called Money…
Q: Exercise 3. Consider a money demand function L(i, Y;) => Pt (i, Y) and M? Mt, where | Y; denotes…
A: The inflation rate is the rate of the increase in the price level. The increase in the money supply…
Q: The CPI or Consumer Price Index measures O Inflation by monitoring the change in gas prices and food…
A: CPI: CPI or consumer price index can be defined as the weighted mean price of the set of commodities…
Step by step
Solved in 2 steps with 2 images
- 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.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."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?
- 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: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.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.
- 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.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.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.
- Suppose 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?If the inflation rate is 6% and Susan receives a 6% increase in income, then, overthe year, Susan’s: (a) Real and nominal income both remain unchanged; (b) Real and nominal income both rise; (c) Real income rises but nominal income remains unchanged; (d) Nominal income rises but real income remains unchanged.