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Suppose Canada and the U.S., on a fixed exchange rate, have real growth rates of 2%, and a risk premium of 1% (Canada is riskier). Canada's real interest rate is 4% and the U.S. nominal interest rate is 8%. what are Canada's inflation and nominal interest rate? please show your calculations. the answer for inflation is 5% and the nominal interest rate is 9%

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Chika Ilonah
Chika IlonahLv10
28 Sep 2019

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Related questions

Suppose the Canadian and U.S. economies, on a flexible exchange rate, have real growth rates of 2% and a risk premium of 1% (Canada is riskier). The Canadian money growth rate is 10%, the U.S. money growth rate is 7% and the U.S. real interest rate is 3% 1)The Canadian nominal interest rate is: a) 10% or less b) 11% c) 12% d) more than 12% 2)The value of the Canadian dollar is falling each year by: a) less than 2% b) 2% c) 3% d) more than 3% please explain how you got the answer. the answer for both the parts is c)

Which of the following statements is TRUE?
 
  If the nominal interest rate is 5% and the inflation rate is 2.5%, the real interest rate is 2.5%.
  If the nominal interest rate is 5% and the inflation rate is 4%, the real interest rate is 9%.
  If the real interest rate is 3% and the inflation interest rate is 5%, the nominal interest rate is 2%.
  If the real interest rate is 3% and the nominal interest rate is 5%, the inflation rate is 8%.

comparing the situation of a nominal rate of 10 percent and an inflation rate of 9 percent with a nominal interest rate of 6 percent and inflation rate of 2 percent, consumers would borrow more in which situation?

a) nominal interest rate of 10 percent since real interest rate is 1 percent

b) nominal interest rate of 6 percent since the real interest rate is 2 percent

c) nominal interest rate of 6 percent since the real interest rate is 4 percent

d) nominal interest rate of 10 percent since the real interest rate is 9 percent

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