1 answer

22. Under which of the following assumptions would the nominal interest rate be equal to the...

Question:

22. Under which of the following assumptions would the nominal interest rate be equal to the real interest rate? (a) expected
22. Under which of the following assumptions would the nominal interest rate be equal to the real interest rate? (a) expected inflation is equal to the nominal interest rate (b) expected inflation is equal to the real interest rate (c) expected inflation is negative (d) expected inflation is equal to zero (e) none of the above 23. If the nominal interest rate is less than the real interest rate, we know that (a) both the nominal or real interest rate must be negative (b) the nominal interest rate must be equal to expected inflation (c) expected deflation must be occurring (d) expected inflation must be positive (e) expected inflation must be zero 24. Expected inflation is -1%. If the Fed wanted to set a real interest rate r = 2%, the nominal interest rate target should be (a) i = 0% (b) i = 1% (e) i = 2% (d) i = 3%

Answers

Ans) the correct option is d) expected inflation is equal to 0

Ans) the correct option is c) expected deflation must be occurring

Ans) the correct option b) i = 1%

Real interest rate = nominal interest rate - expected inflation

.

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