Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 7, Problem 8E
To determine
Real interest rate equation and the reasons high inflation leads to redistribution of income from creditors to debtors.
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Suppose banks require a real interest rate of 12 percent. If they expect inflation to be 3 percent, what is the nominal interest rate?
Multiple Choice
36 percent
15 percent
9 percent
4 percent
Why does inflation have a positive effect on the nominal interest rate?
Can the issuance of government securities reduce the expectation of inflation?
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