When prices are rising, which of the following will be true? Answer The real int

Question

When prices are rising, which of the following will be true? Answer The real interest rate will be lower than the nominal interest rate. The real interest rate will be higher than the nominal interest rate. The nominal interest rate will be negative. The real interest rate will be negative.
Unexpected deflation is costly because Answer The real interest rate is lower than expected the real value of debt increases leading to a higher probability of default by borrowers The purchasing power of monetary assets rises Consumers rush to make purchases


Table 10-1

Year Real GDP (billions of 2000 dollars) 2008 $10,100 2009 10,950 2010 11,425 2011 11,300

Refer to Table 10-1. Using the table above, what is the approximate growth rate of real GDP from 2009 to 2010? Answer 1% 2% 3% 4%
If an economy is growing at a rate of 2.5% per year, how long will it take the economy to double in size? Answer 60 years 43 years 36 years 28 years When prices are rising, which of the following will be true? When prices are rising, which of the following will be true? The real interest rate will be lower than the nominal interest rate. The real interest rate will be higher than the nominal interest rate. The nominal interest rate will be negative. The real interest rate will be negative. Unexpected deflation is costly because Unexpected deflation is costly because The real interest rate is lower than expected the real value of debt increases leading to a higher probability of default by borrowers The purchasing power of monetary assets rises Consumers rush to make purchases


Table 10-1

Year Real GDP (billions of 2000 dollars) 2008 $10,100 2009 10,950 2010 11,425 2011 11,300

Refer to Table 10-1. Using the table above, what is the approximate growth rate of real GDP from 2009 to 2010? Table 10-1

Year Real GDP (billions of 2000 dollars) 2008 $10,100 2009 10,950 2010 11,425 2011 11,300

Refer to Table 10-1. Using the table above, what is the approximate growth rate of real GDP from 2009 to 2010? 1% 2% 3% 4% If an economy is growing at a rate of 2.5% per year, how long will it take the economy to double in size? If an economy is growing at a rate of 2.5% per year, how long will it take the economy to double in size? 60 years 43 years 36 years 28 years The real interest rate will be lower than the nominal interest rate. The real interest rate will be higher than the nominal interest rate. The nominal interest rate will be negative. The real interest rate will be negative.

Explanation / Answer

1., The real interest rate will be lower than the nominal interest rate.

2. Consumers rush to make purchases

3. growth rate = (11425-10950)/10950 = 4.34%

4. 2Y = Y*(1.025)^n

n = 28.07 years

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