Optimizing economic agents use the real interest rate when thinking about the economic costs and returns of a loan. Suppose the average rate paid by banks on savings accounts is 0.75% at a time when inflation is around 1.65%. For the average saver, the real rate of interest on his or her savings is .......???%. (Round your response to two decimal places and use a minus sign if necessary.) If banks expect that the rate of inflation in the coming year will be 4.65% and they want a real return of 7.5% on a certain category of loans, then the nominal rate they should charge borrowers on those loans is .......???%. (Round your response to two decimal places.) If the economy experiences an unexpectedly low rate of inflation, the group that would tend to benefit is ___________. A. debtors (people or businesses who owe money). B. creditors (people or institutions that are owed money). C. both would benefit equally. D. neither benefits.
Optimizing economic agents use the real interest rate when thinking about the economic costs and returns of a loan. Suppose the average rate paid by banks on savings accounts is 0.75% at a time when inflation is around 1.65%. For the average saver, the real rate of interest on his or her savings is .......???%. (Round your response to two decimal places and use a minus sign if necessary.) If banks expect that the rate of inflation in the coming year will be 4.65% and they want a real return of 7.5% on a certain category of loans, then the nominal rate they should charge borrowers on those loans is .......???%. (Round your response to two decimal places.) If the economy experiences an unexpectedly low rate of inflation, the group that would tend to benefit is ___________. A. debtors (people or businesses who owe money). B. creditors (people or institutions that are owed money). C. both would benefit equally. D. neither benefits.
Chapter17: Capital And Time
Section: Chapter Questions
Problem 17.2P
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Optimizing economic agents use the real interest rate when thinking about the economic costs and returns of a loan. Suppose the average rate paid by banks on savings accounts is
0.75%
at a time when inflation is around
1.65%.
For the average saver, the real rate of interest on his or her savings is
.......???%.
(Round
your response to two decimal places and use a minus sign if
necessary.)
If banks expect that the rate of inflation in the coming year will be
4.65%
and they want a real return of
7.5%
on a certain category of loans, then the nominal rate they should charge borrowers on those loans is
.......???%.
(Round
your response to two decimal
places.)
If the economy experiences an unexpectedly
low
rate of inflation, the group that would tend to benefit is ___________.debtors (people or businesses who owe money).
creditors (people or institutions that are owed money).
both would benefit equally.
neither benefits.
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