(a) When was the real interest rate high/low?

(b) When did inflation increase/decrease?

(c) Compare the answers to (a) and (b). Is there any relation? What could be the reason for this relation?

Q13. Consider the data on interest rates (blue lines) and inflation (red lines) shown in the figures below the US12 and the UK13 over the past 60 years. FRED.~ - 3-Month Treasury Bill: Secondary Market Rate - Consumer Price Index for All Urban Consumers: All Items 17.5 15. 12.5 10.0 (Percent) , (Percent Change from Year Ago) 7.5 5.0 2.5 0.0 2.5 1960 1970 1980 1990 2000 2010 Shaded areas indicate US recessions - 2014 research.stlouisfed.org FRED ~ - 3-Month or 90-day Rates and Yields: Treasury Securities for the United Kingdom@ Consumer Price Index: Retail price Index: All Items for the United Kingdom@ 25 20 15 (Percent) , (Percent Change from Year Ago) 10 0 -5 1960 1970 1980 1990 2000 2010 2014 research.stlouisfed.org