Suppose the economy is at full employment with expected inflation rate 7% and nominal interest rate 11%.

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Suppose the economy is at full employment with expected inflation rate 7% and nominal interest rate 11%. Suppose now that the expected inflation rises to 9%. After this change,
1) What is the nominal interest rate?
2) What is the real interest rate?

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Macroeconomics Principles Applications And Tools

ISBN: 9780134089034

7th Edition

Authors: Arthur O Sullivan, Steven M. Sheffrin, Stephen J. Perez

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Question Posted: Mar 03, 2017 09:26 AM

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Suppose the economy is at full employment with expected inflation rate 7% and nominal interest rate 11%.

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The interest rate before taking inflation into account The nominal ...View the full answer

Macroeconomics Principles Applications And Tools

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