If the real instetest rate and the nominal interest rate are both negative and equal to...

If the real instetest rate and the nominal interest rate are both negative and equal to each other, then the

Solutions

Expert Solution

Correct answer:

The alternative related to the inflation premium is going to be zero is the correct answer:

In the given scenario, when real as well as nominal interest rates are negative and equal with each other, then it can happen when there is a zero inflation premium in the economy.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Define the nominal interest rate. How is the nominal interest related to the real interest rate?...

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?

Proof that the PV of nominal CFs at a nominal rate of interest is equal to...

Proof that the PV of nominal CFs at a nominal rate of interest is equal to PV of the parallel real CFs at a equivalent real rate of interest.

If the nominal rate of interest is 14.02% and the real rate of interest is 7.62%,...

If the nominal rate of interest is 14.02% and the real rate of interest is 7.62%, what is the expected rate of inflation?

If the nominal rate of interest is 13.57% and the real rate of interest is 7.53%,...

If the nominal rate of interest is 13.57% and the real rate of interest is 7.53%, what is the expected rate of inflation

Suppose that the nominal interest rate is 4.2%, the real interest rate is 2.8%, real GDP...

Suppose that the nominal interest rate is 4.2%, the real interest rate is 2.8%, real GDP grows at 1%, and this year's money supply is $11.438B. To the nearest million, the size of next year's money supply will be $________B.

What is the real rate of interest? Differentiate it from the nominal rate of interest for...

What is the real rate of interest? Differentiate it from the nominal rate of interest for the risk-free asset, a 3-month U.S. Treasury Bill.

What is the effect of a negative interest rate on the economy when the nominal interest...

What is the effect of a negative interest rate on the economy when the nominal interest rate is less than inflation rate

If the nominal interest rate is 5% in 2019, what is the real interest rate using...

If the nominal interest rate is 5% in 2019, what is the real interest rate using the inflation rate between 2018 and 2019?

If the real interest rate is 7 percent when the nominal interest is 12 rate is...

If the real interest rate is 7 percent when the nominal interest is 12 rate is percent, the inflation rate is Group of answer choices 5 percent. 1.7 percent. -5 percent. 7 percent. 19 percent.

What is the distinction between the nominal interest rate and the real interest rate? 4. In a...

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...

Subjects