Macroeconomics (Book Only)
Macroeconomics (Book Only)
12th Edition
ISBN: 9781285738314
Author: Roger A. Arnold
Publisher: Cengage Learning
Question
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Chapter 14, Problem 15QP
To determine

The nominal interest rate and the real interest rate.

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How might a rapid rise in inflation harm you?  How might a rapid rise in inflation help you?  In answering this question consider your role as both a consumer, worker, and borrower.  Consider the likely effect on your real wages, and any interest you receive as a saver.  Would it be advantageous to borrow money if you expected inflation to rise?   Does it make economic sense to open a savings account at a bank given the latest increase in the CPI.
Do the interest rates reflect the market interest rate?
If you are a banker, should you consider the nominal or real interest rate when deciding which rate to charge for a loan? Explain in 250 words.
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