PRINCIPLES OF MACROECONOMICS-CONNECT ACC
PRINCIPLES OF MACROECONOMICS-CONNECT ACC
7th Edition
ISBN: 9781264088485
Author: Frank
Publisher: MCG
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Chapter 6, Problem 6.9CC
To determine

Identify the real rate of return to holding cash.

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If the real interest rate (rreal) you pay on a one-year loan ends up being 7%, and inflation was 6% over that year, what is the nominal interest rate on your loan? Hint: enter your answer without a % sign Example: if the answer is 4%, enter 4
Dean borrows $400 from Tim.  Tim wants to make a 7% real return on his money, so they both agree on a 7% stated interest rate paid next year. Dean and Tim did not anticipate any inflation, yet the actual inflation turned out to be 2% next year. In this case, what is Tim’s real rate of return?
Consider the simple economy that produces only three products. Use the information in the following table to calculate the (annual rate of) inflation for 2018 as measured by the consumer price index (CPI). BASE YEAR (2010) 2017 2018 Product Quantity Price $10.00 2.00 Price Price Haircuts 3 $11.00 $16.20 2.40 Hamburgers Movies 10 2.45 15.00 15.00 14,00 The inflation rate for 2018 as measured by the consumer price index (CPI) is%. (Enter your response rounded to two decimal places.)
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