answer

watching

views

orchidshark425Lv1

28 Sep 2019

Inflation affects creditors and debtors. Suppose the Canadiandebtors borrowed $100 from the Canadian creditors on December 31,1992 and promised to pay back $105 on December 31, 1993. This isequivalent to paying back a nominal interest rate of 5%

CPI For 1991: 95.12, CPI 1992: 100, CPI 1993:.117.79

1) Find the real interest rate, which is defined as real interestrate = nominal interest rate â inflation rate.

answer

watching

111

views

For unlimited access to Homework Help, a Homework+ subscription is required.

You have 0 free answers left.
Get unlimited access to 3.8 million step-by-step answers.

Get unlimited access

Already have an account? Log in

Yusra AneesLv10

28 Sep 2019

Unlock all answers

Get 1 free homework help answer.

Already have an account? Log in

Related questions

11. Inflation

(a) What is the meaning of inflation and how is it measured?

(b) Distinguish between demand-pull and cost-push inflation.

12. Assume the next four parts are based on the following data using year 1 as the base year. All dollars are in billions. (Be sure to show work!)

Year	Nominal Income	CPI(%)
1	$5, 263	100
2	$5, 712	105
3	$5, 784	109
4	$5, 997	114

(a) Find real income in Year 4.

(b) What was the percentage rise in prices between year 1 and 3? ____________%

(d) What was the increase in real income from year 3 to year 3 in %? __________%

taupebuffalo898

QUESTION 16

Which of the following statements is true?

		The administrative costs per dollar are greater for a large loan than a small loan.
		The risk on a long-term loan is likely to be less than on a short-term loan, ceteris paribus.
		a and b
		none of the above

1 points

QUESTION 17

If the price for loanable funds is less than the return on capital, then firms will

		borrow in the loanable funds market and invest in capital goods, and as this happens, the quantity of capital decreases and its return rises.
		borrow in the loanable funds market and invest in capital goods, and as this happens, the quantity of capital increases and its return falls.
		not borrow in the loanable funds market, and over time the capital stock will decrease and the return on capital will fall.
		not borrow in the loanable funds market, and over time the capital stock will decrease and the return on capital will rise.

1 points

QUESTION 18

Economic rent is

		the payment a renter pays his or her landlord.
		payment in excess of fixed costs.
		payment in excess of opportunity costs.
		the same as interest if we are discussing a capital good purchase.
		none of the above

1 points

QUESTION 19

Suppose a bank makes a $1,000 loan to you at 5 percent interest when the expected and actual inflation rate are zero percent. Before you pay back the $1,000 principal and $50 interest, the inflation rate increases to 10 percent. Does anyone lose from this situation?

		Nobody loses, because the terms were set before the inflation rate increased, and once the terms are set, inflation does not affect the situation.
		You lose, because the dollars that you have borrowed are worth more the higher the inflation rate.
		The banker loses, because you will be paying back the loan with dollars that are worth less than the dollars you borrowed.
		Both the banker and you lose, for the reasons in answers b and c.
		There is not enough information to answer the question.

1 points

QUESTION 20

A change in the expected rate of inflation from 5 percent to 3 percent will

		decrease the real interest rate by 2 percentage points.
		decrease the real interest rate by 3 percentage points.
		increase the nominal interest rate by 2 percentage points.
		decrease the nominal interest rate by 2 percentage points.

Weekly leaderboard

Home

Homework Help 3,900,000

Economics 400,000

Unlock all answers

Related textbook solutions

Principles of Economics

Principles of Macroeconomics

Principles of Microeconomics

Related questions

Weekly leaderboard