write an equation that defines the real interest rate. use the equation to explain why unexpectedly high inflation redistributes income from creditors to debtors.

Q: Describe what is the Specific inflation rate? Give an example?

A: Inflation rate: The term inflation refers to the average price rise over a certain period of time.…

Q: True or false? The nominal rate of interest is the difference between the real rate and the…

A: Nominal interest rate is the interest rate which is stated in loan agreement . It is the rate of…

Q: What is the equilibrium quantity of credit card balances when the nominal interest rate is zero?…

A: Nominal interest rate refers to the interest rate before taking inflation into account. Nominal can…

Q: What is the effect of inflation on the real value of money? a. Decrease b. Not related c. No effect…

A: Inflation is an increase in the general price level.  It decreases the purchasing power of the…

Q: If the nominal interest rate is 10 percent and the inflation rate is 4 percent, then the real…

A: Nominal interest rate is the current rate of interest.Real interest rate is the change in interest…

Q: Can the issuance of government securities reduce the expectation of inflation?

A: Bond or security ownership is similar to owning a stream of future cash payments. These cash…

Q: Explain why people with a fixed-rate mortgage would benefit from high inflation>

A: An interest rate that remains fixed for the life of the loan is known as a fixed mortgage rate.…

Q: true/false, explain There are an infinite number of combinations of real interest rates and…

A: True

Q: What is the relationships of interest rate to unemployment under the Keynesian Theory of Wages?

A: Keynes stated that the interest rate changes and try to balance the supply and demand for money in…

Q: The relationship between nominal and real interest rates continues to hold when there is deflation…

A: In an economy, the difference between actual and expect interest rate will lead to affect the…

Q: Q. Differentiate the Expected real interest rate to Realized real interest rates? Give examples.

A: The realized interest rate is given by subtracting the nominal rate from the current inflation rate.…

Q: Dennis buys a house in 1973 and finances it with a mortgage that carries an annual interest rate of…

A: The real interest rate basically is the interest rate that has been adjusted after taking into…

Q: In which of the following situations is it least advantageous to be lending?   Select one: A. The…

A: Answer: When the real interest rate will be the lowest the lending will be the least advantageous.…

Q: Describe the difference between nominal interest rate and real interest rate?

A: In economics, interest rate is classified as nominal interest rate and real interest due to the…

Q: 20.Which of the following statements is correct?   a The interest rate that is usually reported is…

A: c If the nominal interest rate has decreased and the real interest rate has also decreased,…

Q: When the inflation rate rises, people who live on a fixed income will experience a decrease in their…

A: Inflation is defined as the general price rise of the goods in the economy.

Q: Which of the following would cause the real interest rate to be negative? a.When the nominal…

A: The Fisher calculation forecasts that the nominal rate would equivalent the equilibrium real rate…

Q: Suppose individuals expected inflation in a given year to be around 3%, but it actually ended up…

A: Inflation is described as an increase in the price of most everyday or common goods and services,…

Q: Suppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then…

A: The real interest rate on this loan will be lower because if the inflation is more than expected…

Q: Is the Market interest rate commonly known as the nominal interest rate? Why?

A: Nominal interest rate is the amount of money that we need to pay or we receive without considering…

Q: Refer to the hypothetical data in the table to answer the three questions Year        nominal…

A: Using Fisher equation to fill the values of nominal interest rate, real interest rate and inflation…

Q: I. Fill in the table below and answer the questions that relate to the data in the table. Nominal…

A: A nominal interest rate is the interest rate before inflation is factored in. Nominal can also refer…

Q: Explain how the average inflation rates are calculated?

A: Inflation is a situation where the price of the commodity that is goods and services are rising in…

Q: If you deposit money in the bank for one year scenario 1: nominal interest rate = 10%, inflation…

A: For the deposit, the growth is more when the real interest rate is higher. This implies when there…

Q: Why is it important that the rate at which we earn interest should be higher than the inflation rate

A: The inflation rate is the rate at which the price level of goods and services rises in the economy.…

Q: If inflation is expected to​ increase,   A. the nominal interest rate will increase.   B.…

A: Real Interest Rate: The real interest rate is the rate that excludes or does not account the…

Q: If the nominal interest rate is 10 percent and the real interest rate is 5 percent, the inflation…

A: Inflation rate: It is the rate of increase in the prices in a particular time period.

Q: Distinguish between the market interest and the inflation rate?

A: The market interest rate is the interest rate that is prevailing in the market. The interest rate is…

Q: What are the factors that shift the output demand curve? (Select all that apply.) A. Real interest…

A: In a market, there are various factors that influence the market demand and market supply due to…

Q: What does this mean? "When drawn against the real interest rate, output supply increases if the…

A: “When drawn against the real interest rate, output supply increases if the labor supply is…

Q: Do you think a negative nominal interest rate can happen?  What about a negative real interest rate?…

A: When people borrow money from the lender, a proportion of the amount borrowed is paid additionally…

Q: Bankers make loans in the Nominal Interest Rate, so why do bankers care so much about the Real…

A: We know,  Nominal interest rate = Real interest rate - inflation rate

Q: When lenders begin to expect higher levels of future inflation,   a. Nominal interest rates today…

A: The inflationary expectations play a major role in setting the nominal interest rate and real…

Q: The real interest rate in Africa is 1.1%.  In 2019, the inflation rate was 1.6%.  The expected…

A: The Fisher equation is a linear approximation of function representing the relationship between the…

Q: Assuming the nominal interest rate is positive, ceteris paribus, which of the following statements…

A: We know: Real Interest Rate = Nominal Interest Rate - Inflation This means how much are we earning…

Q: if the nominal interest rate is 18 percent and the real interest rate is 10 percent, the inflation…

A: As per Fisher Effect, Nominal Interest Rate - Inflation Rate = Real Interest Rate

Q: Refer to the hypothetical data in the table to answer the three questions. What was the real…

A: According to Fisher Effect Real interest rate = Nominal interest rate - Inflation rate.