Author Question: Say that initially the nominal interest rate is 6 and prices are stable, but the inflation rate the ... (Read 360 times)

jman1234

  • Hero Member
  • *****
  • Posts: 560
Say that initially the nominal interest rate is 6 and prices are stable, but the inflation rate the following year rises to 3. If the real rate of interest is to remain unchanged, the nominal interest rate in the second year must:
 a. rise by 9 percentage points.
  b. rise by 6 percentage points.
  c. rise by 3 percentage points.
  d. remain unchanged.

Question 2

What would happen to the real interest rate if originally the nominal interest rate was 14 and the inflation rate was 10, then the nominal interest rate fell to 7 as the inflation rate fell to 4? It would go from:
 a. 24 to 11.
  b. 11 to 24.
  c. 4 to 3.
 d. 3 to 4.



Jayson

  • Sr. Member
  • ****
  • Posts: 350
Answer to Question 1

c

Answer to Question 2

c



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question


 

Did you know?

Giardia is one of the most common intestinal parasites worldwide, and infects up to 20% of the world population, mostly in poorer countries with inadequate sanitation. Infections are most common in children, though chronic Giardia is more common in adults.

Did you know?

Your heart beats over 36 million times a year.

Did you know?

Medications that are definitely not safe to take when breastfeeding include radioactive drugs, antimetabolites, some cancer (chemotherapy) agents, bromocriptine, ergotamine, methotrexate, and cyclosporine.

Did you know?

According to animal studies, the typical American diet is damaging to the liver and may result in allergies, low energy, digestive problems, and a lack of ability to detoxify harmful substances.

Did you know?

Though newer “smart” infusion pumps are increasingly becoming more sophisticated, they cannot prevent all programming and administration errors. Health care professionals that use smart infusion pumps must still practice the rights of medication administration and have other professionals double-check all high-risk infusions.

For a complete list of videos, visit our video library