Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 16, Problem 5QP
To determine
Identify the difference between the real interest rate and the nominal interest rate.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
The Nominal Interest rate and inflation rate in an economy is same.
What will be the real interest in such case?
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.
Suppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then inflation turns out to be higher than they both expected.Is the real interest rate on this loan higher or lower than expected?Does the lender gain or lose from this unexpectedly high inflation? Does the borrower gain or lose?Inflation during the 1970s was much higher than most people had expected when the decade began. How did this affect homeowners who obtained fixed-rate mortgages during the 1960s? How did it affect the banks that lent the money?
Chapter 16 Solutions
Microeconomics
Ch. 16.1 - Prob. 1STCh. 16.1 - Prob. 2STCh. 16.1 - Prob. 3STCh. 16.1 - Prob. 4STCh. 16.2 - Prob. 1STCh. 16.2 - Prob. 2STCh. 16.2 - Prob. 3STCh. 16.4 - Prob. 1STCh. 16.4 - Prob. 2STCh. 16.4 - Prob. 3ST
Ch. 16.4 - Prob. 4STCh. 16 - Prob. 1QPCh. 16 - Prob. 2QPCh. 16 - Prob. 3QPCh. 16 - Prob. 4QPCh. 16 - Prob. 5QPCh. 16 - Prob. 6QPCh. 16 - Prob. 7QPCh. 16 - Prob. 8QPCh. 16 - Prob. 9QPCh. 16 - Prob. 10QPCh. 16 - Prob. 11QPCh. 16 - Prob. 12QPCh. 16 - Prob. 13QPCh. 16 - Prob. 14QPCh. 16 - Prob. 15QPCh. 16 - Prob. 16QPCh. 16 - Prob. 17QPCh. 16 - Prob. 1WNGCh. 16 - Prob. 2WNGCh. 16 - Prob. 3WNG
Knowledge Booster
Similar questions
- True or false? The nominal rate of interest is the difference between the real rate and the expected rate of inflation.arrow_forwardIs the Market interest rate commonly known as the nominal interest rate? Why?arrow_forwardDo you think a negative nominal interest rate can happen? What about a negative real interest rate? Explain.arrow_forward
- Suppose consumer confidence falls. What happens to the nominal interest rate and income?arrow_forwardSuppose the nominal interest rate is 0.64 and the expected inflation rate is 0.47 1) What is the exact real interest rate? 2) What is the approximate real interest rate?arrow_forwardProduction and Growth Describe the difference between nominal interest rate and real interest rate?arrow_forward
- Tamika is lending Juan $1,000 for one year. The CPI is 1.60 at the time the loan is made, and they both expect it to be 1.68 in one year. If Tamika and Juan agree that Tamika should earn a 3 percent real return for the year, the nominal interest rate on this loan should be percent.arrow_forwardPlease explain and provide the calculation for the real interest rate for both the situationsarrow_forwardA family of four has an income of $15,000 today and will earn $24,000 tomorrow. If the family consumes $11,500 in the first period and $15,000 in the second period what is the interest rate?arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning