Let us assume you have $1000 to spend on buying books. Each book costs on average $50 and are expected to increase in price by 4%. If you invest your money now, you will be able to buy 21 books in years time for what 20 books cost today. What interest rate you need to find in nominal terms to overcome effects of inflation and still realize reward for waiting?
Let us assume you have $1000 to spend on buying books. Each book costs on average $50 and are expected to increase in price by 4%. If you invest your money now, you will be able to buy 21 books in years time for what 20 books cost today. What interest rate you need to find in nominal terms to overcome effects of inflation and still realize reward for waiting?
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter6: Measuring The Cost Of Living
Section: Chapter Questions
Problem 9PA
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