Macroeconomics (Fourth Edition)
Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Chapter 14, Problem 3RQ
To determine

Define deflation and problems deflation pose for the macroeconomy.

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Suppose both nominal GDP rises by 10 percent and real GDP rise by 2percent. What has happened to the general price level? What is the inflationrate? Show your calculation.
Research suggests that macroeconomic factors can explain the dynamics of interest rates in the economy. Suppose we are interested in understanding whether inflation plays a role in explaining interest rates. Fitting a line between the current nominal interest rate i and current inflation we obtain: i = 0.041 -0.147 What is the expected level of interest rates when inflation is at the level of 4%?
Harare Zimbabwe's central bank today raised its key intrest rate from 50 percent to 70 percent. The governor of the Reserve Bank of Zimbabwe said the higher rate was inteded to slow consumer spedning, increase foreign buying of Zimbabwe dollars, and slow the rate of inflation, currently running at approximately 200 percent a year. According to the World View after the key intrest rate was raised what was, a) the nominal intrest rate? b) the real intrest rate?"
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