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.

Solutions

Expert Solution

Option A.

Given that the real interest rate is 7 percent and the nominal interest rate is 12 percent.
Then we can find the Inflation rate using the formula,

Nominal interest rate = inflation rate + real Interest rate

12 = 7 + inflation rate

Inflation rate = 12 - 7

= 5 percent.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

The nominal rate of interest is 7% and the real rate of interest is 3%. What is the expected inflation rate?

10. If the nominal interest rate is 7 percent and expected inflation is 4.5 percent, then...

10. If the nominal interest rate is 7 percent and expected inflation is 4.5 percent, then what is the expected real interest rate? A. 11.5 percent B. 7.0 percent C. 4.5 percent D. 2.5 percent E. less than 2.5 percent 11. Which of the following statements is (are) correct? (x) In the U.S., from the early 1980s through the early 1990s, both inflation and nominal interest rates fell. (y) If a country had deflation, the nominal interest rate would be...

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?

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.

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?

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...

When a change in a country’s nominal interest rate is caused by a rise in the expected real interest rate, the domestic currency appreciates

Discuss the following statements. a.“When a change in a country’s nominal interest rate is caused by a rise in the expected real interest rate, the domestic currency appreciates. When the change in caused by a rise in expected inflation, the currency depreciates.” b.“When domestic and foreign bonds are perfect substitutes, a central bank should be indifferent about using domestic or foreign assets to implement monetary policy.”

Subjects