On the accompanying graph, illustrate for each year (A) the nominal interest rate (use the prime rate

Question:

On the accompanying graph, illustrate for each year (A) the nominal interest rate (use the prime rate of interest), (B) the CPI inflation rate, and (C) the real interest rate (adjusted for same-year CPI inflation). The required data appear on the inside cover of this book.

(a) In what years was the official goal of price stability met?
(b) In what years was the inflation rate lowest?
(c) In the most recent of those years, what was the

(i)  Nominal interest rate?
(ii) Real interest rate?

(d) What was the range of rates during this period for

(i)  Nominal interest rates?
(ii) Real interest rates?

(e) On a year-to-year basis, which varies more—nominal or real interest rates?

Rate 10 9 8 7 6  4 3 2 1 Price Stability Nominal Rate CPI Inflation Rate  Real Interest Rate 0 2000 2001 2002

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The Macro Economy Today

ISBN: 978-1259291821

14th edition

Authors: Bradley R. Schiller, Karen Gebhardt

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