Answered: Suppose banks require a real interest…

Suppose banks require a real interest rate of 10 percent. If they expect inflation to be 2 percent, what is the nominal interest rate? Multiple Choice 5 percent 20 percent 8 percent 12 percent

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

Suppose banks require a real interest rate of 10 percent. If they expect inflation to be 2 percent, what is the nominal interest rate?

Multiple Choice

5 percent
20 percent
8 percent
12 percent

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Use the information in the table to calculate the %change in prices (inflation rate), using a chain-weighted methodology. Q1=2 Q2=3 Year (t) P1 E1 P2 E2 E(t) 2017 $1.05 $2.00 2018 $1.10 $2.10 2019 $1.10 $2.15 2020 $1.15 $2.15 Price Index Inflation Rate 2017 2018 2019 2020 Question 1: What is the inflation rate for 2019? a) 1.76% b) 1.16% c) -0.60% d) -3.02
Suppose banks require a real interest rate of 10 percent. If they expect inflation to be 2 percent, what is the nominal interest rate? Multiple Choice 5 percent 20 percent 8 percent 12 percent
If a bank expects inflation to increase in the near future, how will it respond? It will start paying less interest on deposits. It will seek to reduce the amount of cash held in its vaults. It will temporarily scale back its efforts to gain new customers. It will start charging more interest on loans. It will temporarily suspend withdrawals.
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