LSC CUMBERLAND EC202 MICRO>PKG<
21st Edition
ISBN: 9781260586992
Author: McConnell
Publisher: MCG
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Question
Chapter 18, Problem 8DQ
To determine
The difference between real interest rate and nominal interest rate.
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Students have asked these similar questions
come is included
13. LAST WORD Assume that you borrow $5,000, and you pay
back the $5,000 plus $250 in interest at the end of the year.
Assuming no inflation, what is the real interest rate? What
would the interest rate be if the $250 of interest had been dis-
counted at the time the loan was made? What would the inter-
est rate be if you were required to repay the loan in 12 equal
monthly installments?
Question 3
1. Suppose that inflation is 5% between years 1 and 2. Now suppose your hourly
wage is $20/hour. What will your wage have to be for your real wage to stay
the same from year 1 to year 2?
O 20.10
O 30
O 25.75
O 21
Assume that John has a car loan with a nominal interest rate of 4%. If the actual inflation rate is 3%,
then the real rate is
3%
4%
O 7%
O 1%
Chapter 18 Solutions
LSC CUMBERLAND EC202 MICRO>PKG<
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Similar questions
- Suppose that the consumer price index at year-end 2008 was 140 and by year-end 2009 had risen to 154. What was the inflation rate during 2009? 7.1 percent 10 percent O 14.2 percent O 9.1 percentarrow_forwardSuppose that the actual unemployment rate in a country is 7.7 percent. If the country's frictional unemployment rate is 3.5 percent and its structural unemployment rate is 1.1 percent, what is its cyclical unemployment rate? O 11.7 percent O 3.1 percent O 5.3 percent O 4.1 percent ۵arrow_forward"If the consumer price index was 102 in the base year and 117 in the following year, the inflation rate was" O 15 percent. 14.7 percent. 7 percent. O 1.07 percent.arrow_forward
- In 2018, nominal gross domestic product (GDP) in the United States grew 5.2%. However, inflation was 2.4%. What was the real GDP growth rate O 0,5% 7.7% O 2.8% O 2.2%arrow_forwardSuppose, you are lending money to your friend Julia and you want a real rate of return of 8.00%. Furthermore, you expect the inflation rate to be 4.50%. Which of the following interest rates should you charge? O A. 6.25% O B. 12.50% O C. 8.00% O D. 3.50% Click to select your answer. lenovo V560arrow_forwardSuppose the consumer price index (CPI) stands at 250 this year. If the inflation rate is 10 percent, then next year's CPI will equal: O 260 $260 O $275 O 275arrow_forward
- The consumer price index was 100 in 1994 and 103.3 in 1995. Therefore, the rate of inflation in 1995 was about: O 3.3 percent O 2.8 percent O 4.4 percent 1 pts O 6 percentarrow_forwardSuppose nominal GDP for an economy rose from $120 billion in 2016 to $150 billion in 2017 and that the inflation rate over the same period was 5 percent. By what percentage did real GDP increase between 2016 and 2017? O 40% O 35% O 20% O 30% O 25%arrow_forwardWhat is the expected real after-tax interest rate, when interest rate is 5%, expected inflation rate is 2% and tax rate is 30% O a. 2.0% O b. 3.0% O c. 2.5% O d. 1.5%arrow_forward
- d. A decrease in aggregate demand. e. An increase in aggregate demand that exceeds an increase in aggrega supply.arrow_forwardLet 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? O A. 10,5% O B. -1.0% O C. 9.0% O D. 8.05%arrow_forwardRefer to the information provided in Table 7.4 below to answer the questions that follow. Table 7.4 Good A Good B Good C Units Purchased 5 10 4 2010 $1.00 $2.00 $4.00 Price per Unit in 2011 $1.50 $2.50 $4.50 Refer to Table 7.4. If 2011 is the base year, the inflation rate between 2010 and 2011 is O 23.2%. O 20.4%. O 18.8%. O 14.1%. 2012 $1.50 $3.00 $5.00arrow_forward
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