Question

In: Economics

If the nominal interest rate is 0.09 and the (expected) inflation rate is 0.03, what is...

If the nominal interest rate is 0.09 and the (expected) inflation rate is 0.03, what is the real interest rate? (Answer as a decimal.)

Consider an economy with only one good: corn. In 2010 the price of corn was 6.08 and in 2011 the price was 7.9. What was the inflation rate? (Answer as a decimal. Round to three decimal places.)

Let NGDP be 1,825 and the money supply be 474. What is velocity? (Round to one decimal place.)

Solutions

Expert Solution

1.If the nominal interest rate is 0.09 and the (expected) inflation rate is 0.03, what is the real interest rate? (Answer as a decimal.)

Answer :

Real interest rate =nominal interest rate - inflation rate

=0.09-0.03

=0.06

2.

Consider an economy with only one good: corn. In 2010 the price of corn was 6.08 and in 2011 the price was 7.9. What was the inflation rate?

Answer :

Inflation =[(price in 2011-price in 2010)/price in 2010]

=[(7.9-6.08)/6.08]

=[1.82/6.08]

=0.299

3.Let NGDP be 1,825 and the money supply be 474. What is velocity? (Round to one decimal place.)

Answer :

Velocity of money =gdp / money supply

=1825/474

=3.9

Rahul Sunny answered 2 years ago
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