There is a persistent fear that there will be a high level of deflation. Many economists arn that it may be worse for the economy than if there is high inflation. Suppose that Herb is in debt and has to pay a 5.50% nominal interest rate. He expected inflatin to be 3.00%. Instead, inflation is -2.00% deflation. What is the real interest rate that Herb expected to pay? What is the real interest rate that Herb is actually paying? Because the economy is experiencing deflation of -2.00% nstead of inflation of 3.00%. Herb's real interest rate, compared t what he expected to pay, has A. decreased, so Herb feels poorer. B. decreased, so Herb feels richer. C. increased, so Herb feels richer. D. increased, so Herb feels poorer.
There is a persistent fear that there will be a high level of deflation. Many economists arn that it may be worse for the economy than if there is high inflation. Suppose that Herb is in debt and has to pay a 5.50% nominal interest rate. He expected inflatin to be 3.00%. Instead, inflation is -2.00% deflation.
What is the real interest rate that Herb expected to pay?
What is the real interest rate that Herb is actually paying?
Because the economy is experiencing deflation of -2.00% nstead of inflation of 3.00%. Herb's real interest rate, compared t what he expected to pay, has
A. decreased, so Herb feels poorer.
B. decreased, so Herb feels richer.
C. increased, so Herb feels richer.
D. increased, so Herb feels poorer.
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