In 1981, many nominal interest rates in the United States were 15%, but the inflation rate was
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Question:
In 1981, many nominal interest rates in the United States were 15%, but the inflation rate was 10%. In 2015, many interest rates were 1%, and the inflation rate was 2%.
Part 1
In 1981, the real interest rate was _____%, and in 2015, the real interest rate was _____%.
Part 2
All else equal, the drop in interest rates between 1981 and 2015 would cause the quantity of loanable funds demanded to (increase/ decrease/ not change).
Part 3
Suppose in either 1981 or 2015 you saved $1,000. How much interest much would have earned in real terms?
1981: $_____
2015: $_____
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