Suppose in 2017, the United Kingdom economy was at full employment. Nominal GDP was £2,665 billion, the real interest rate was 4 percent per year, the inflation rate was 3 percent a year, and the price level was 125. Calculate the nominal interest rate. In the long run, if the real interest rate remains the same but the inflation rate increases to 9 percent a year, how does the nominal interest rate change? The nominal interest rate is nothing percent a year. In the long run, if the real interest rate remains the same but the inflation rate increases to 9 percent a year, then the nominal interest rate ▼ decreases to remains unchanged at increases to ------ percent a year.
Suppose in 2017, the United Kingdom economy was at full employment. Nominal GDP was £2,665 billion, the real interest rate was 4 percent per year, the inflation rate was 3 percent a year, and the price level was 125. Calculate the nominal interest rate. In the long run, if the real interest rate remains the same but the inflation rate increases to 9 percent a year, how does the nominal interest rate change? The nominal interest rate is nothing percent a year. In the long run, if the real interest rate remains the same but the inflation rate increases to 9 percent a year, then the nominal interest rate ▼ decreases to remains unchanged at increases to ------ percent a year.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Suppose in
2017,
the United Kingdom economy was at full employment.Nominal GDP was
£2,665
billion, the real interest rate was
4
percent per year, the inflation rate was
3
percent a year, and the price level was
125.
Calculate the nominal interest rate.
In the long run, if the real interest rate remains the same but the inflation rate increases to
9
percent a year, how does the nominal interest rate change?The nominal interest rate is
nothing
percent a year.In the long run, if the real interest rate remains the same but the inflation rate increases to
9
percent a year, then the nominal interest rate
▼
decreases to
remains unchanged at
increases to
------
percent a year.Expert Solution
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