Suppose the inflation premium is 2 percent and the nominal interest rate is 1 percent. a. What is the real interest rate? b. What if the inflation premium is 3 percent while the nominal interest rate is 0.5 percent?

Suppose the inflation premium is 2 percent and the nominal interest rate is 1 percent. a. What is the real interest rate? b. What if the inflation premium is 3 percent while the nominal interest rate is 0.5 percent?

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: Money Growth And Intlation

Section: Chapter Questions

Problem 6PA

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Question

Suppose the inflation premium is 2 percent and
the nominal interest rate is 1 percent.
a. What is the real interest rate?
b. What if the inflation premium is 3 percent while
the nominal interest rate is 0.5 percent?

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