The nominal exchange rate is the nominal interest rate in one country divided by the nominal interest rate in the other country. the ratio of a foreign country's interest rate to the domestic interest rate. rate at which a person can trade the currency of one country for another. the real exchange rate minus the inflation rate.
Define and describe nominal and real interest rates. What
impact do interest rates have on the cost of financing a purchase?
What is the discount formula?
Define and describe nominal and real interest rates. What impact do
interest rates have on the cost of financing a purchase? What is
the discount formula.
Define the nominal interest rate. How is the nominal interest
related to the real interest rate? Why can we think of 1+ rt ,
where rt is the real interest rate, as the relative price of
consumption today in terms of consumption in the future?
What is the distinction between the
nominal interest rate and the real interest rate?
4. In a
diagram, show the effect on the real interest rate and amount of
investment if people’s disposable income increases.
5. Explain how
a government budget deficit affects the market for loanable funds.
What is the effect on investment? Ignore the possibility of a
Ricardo-Barro effect.
6. Before
there is any international trade or international lending and
borrowing, suppose the world real interest rate is less than the...