Question: Question 9 (1 point) Due to a recession, expected inflation this year is only 1.0%. However, the inflation rate in Year 2 and thereafter is

Question 9 (1 point) Due to a recession, expected inflation this

Question 9 (1 point) Due to a recession, expected inflation this year is only 1.0%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 1.0%. Assume that the expectations theory holds and the real risk-free rate (r*) is 2.0%. If the yield on 10-year Treasury bonds equals the 1-year yield plus 13.50%, what inflation rate is expected after Year 1? 0 13.500% 0 14.500% 16.000% 0 16.500%

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