Question
In: Economics
The interest rate is 10%. The inflation rate is 5% and the expected inflation rate is...
The interest rate is 10%. The inflation rate is 5% and the expected inflation rate is 10%. The actual real interest rate is:
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less than or equal to -5% |
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greater than -5% but less than or equal to 0% |
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greater than 0% but less than or equal to 5% |
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greater than 5% but less than or equal to 10% |
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greater than 10% |
Solutions
Expert Solution
Correct Option: greater than 0% but less than or equal to 5%.
It is because real interest rate adjusted for inflation will be = 10% - 5% = 5%
while real interest rate adjusted for expected inflation will be = 10% - 10% = 0%
Therefore, actual real interest will lie between 0% to 5%.
Rahul Sunny answered 2 years agoRelated Solutions
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Page | 2
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