ECON 2H03 Lecture Notes - Lecture 11: Nominal Interest Rate, Real Interest Rate, Fisher Equation

42 views6 pages

Document Summary

To spend more without raising taxes or selling bonds, the government can print money. The revenue raised from prining money is called seigniorage. The inlaion tax: prining money to raise revenue causes inlaion. Inlaion is like a tax on people that hold money. The interest bank pays is called nominal interest rate and increase in purchasing power is real interest rate. Let i = nominal interest rate r = real interest rate. The fisher equaion: i = r + . The quanity theory and fisher equaion together tells that money growth afects the nominal interest rate. The one-for-one relaion between inlaion rate and the nominal interest rate is known as the. Ex ante the real interest rate which borrower and lender expect when the loan is made. Ex post the real interest rate that is actually realized. In the quanity theory of money, the demand for real money balances depends only on real income y.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

Related Questions