Q7) At T1, an economy is in long-run equilibrium at a real interest rate of 4%, a price level of 100, and with an expected inflation rate of 0%. If in T2 the actual price level is 95, then in that time period: A) r=4%, i = 4% B) r9%, i -1% C) r= -1%, i 4% Dr= -1%, i 9%

Q7) At T1, an economy is in long-run equilibrium at a real interest rate of 4%, a price level of 100, and with an expected inflation rate of 0%. If in T2 the actual price level is 95, then in that time period: A) r=4%, i = 4% B) r9%, i -1% C) r= -1%, i 4% Dr= -1%, i 9%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Q7) At T1, an economy is in long-run equilibrium at a real interest rate of 4%, a price level of 100, and
with an expected inflation rate of 0%. If in T2 the actual price level is 95, then in that time period:
A) r = 4%, i = 4%
B) r= 9%, i -1%
C) r= -1%, i 4%
Dr= -1%, i 9%
1

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