Author Question: The Fisher equation implies that an increase in the nominal rate of interest relative to the real ... (Read 82 times)

bcretired · **on:** Jun 30, 2018

The Fisher equation implies that an increase in the nominal rate of interest relative to the real rate indicates that ________.

A) inflation is expected to rise
B) inflation is expected to decrease
C) the real cost of borrowing has increased
D) the real cost of borrowing has decreased
E) none of the above

Question 2

Explain the relationship between business cycles in different countries.

What will be an ideal response?

matt · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

A

Answer to Question 2

Business cycles across countries are related but not perfectly synchronized. Since countries trade with each other, if one country enters a recession this will reduce exports from other countries to the recessionary country and will have a negative effect on real GDP in the exporting countries. Also, macroeconomic shocks can be global. Oil price shocks often impact many nations at the same time, as did the financial crisis of 2007-2008. Due to factors such as these, business cycles appear to be related across countries, and in instances of global shocks, fairly synchronized as well.