Macroeconomics for Today (MindTap Course List)
9th Edition
ISBN: 9781305507142
Author: Irvin B. Tucker
Publisher: Cengage Learning
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Question
Chapter 7, Problem 5SQ
To determine
Find out the real interest rate from nominal interest rate.
Expert Solution & Answer
Answer to Problem 5SQ
Option ‘d’ is correct.
Explanation of Solution
Option (d):
The real rate of interest can be calculated as follows:
The calculated value of real interest rate is equal to the given value of 3 percent. Thus, option 'd' is correct.
Option (a):
The calculated value of real interest rate is less than the given value of 5 percent. Thus, option 'a' is incorrect.
Option (b):
The calculated value of real interest rate is less than the given value of 15 percent. Thus, option ‘b’ is incorrect.
Option (c):
The calculated value of real interest rate is less than the given value of 6 percent. Thus, option ‘c’ is incorrect.
Economics Concept Introduction
Nominal interest rate: Nominal interest rate refers to the actual amount of money paid by the debtors to the creditors on a fixed amount of money.
Real interest rate: Real interest rate refers to the nominal interest rate which can be adjustable with inflation.
Inflation: Inflation refers to a continuous increase in the average price level in an economy.
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Chapter 7 Solutions
Macroeconomics for Today (MindTap Course List)
Ch. 7.3 - Prob. 1GECh. 7.3 - Prob. 2GECh. 7 - Prob. 1SQPCh. 7 - Prob. 2SQPCh. 7 - Prob. 3SQPCh. 7 - Prob. 4SQPCh. 7 - Prob. 5SQPCh. 7 - Prob. 6SQPCh. 7 - Prob. 7SQPCh. 7 - Prob. 8SQP
Ch. 7 - Prob. 9SQPCh. 7 - Prob. 10SQPCh. 7 - Prob. 11SQPCh. 7 - Prob. 1SQCh. 7 - Prob. 2SQCh. 7 - Prob. 3SQCh. 7 - Prob. 4SQCh. 7 - Prob. 5SQCh. 7 - Prob. 6SQCh. 7 - Prob. 7SQCh. 7 - Prob. 8SQCh. 7 - Prob. 9SQCh. 7 - Prob. 10SQCh. 7 - Prob. 11SQCh. 7 - Prob. 12SQCh. 7 - Prob. 13SQCh. 7 - Prob. 14SQCh. 7 - Prob. 15SQCh. 7 - Prob. 16SQCh. 7 - Prob. 17SQCh. 7 - Prob. 18SQCh. 7 - Prob. 19SQCh. 7 - Prob. 20SQ
Knowledge Booster
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