22. Ceteris paribus, if the real interest rate is 6 percent and the price level

Question

22. Ceteris paribus, if the real interest rate is 6 percent and the price level is falling at a rate of 2 percent, whatis nominal interest rate? A.8 percent 6 percent C. 10 percent D. 4 percent G 1-2 23. Ceteris paribus, in which case below does a person's purchasing power from saving increase the most? A. The nominal interest rate-10% and inflation-8% B. The nominal interest rate 9% and inflation = 6%. e nominal interest rate-7% and inflation = 2%. The nominal interest rate-8% and inflation 49 24. When money is neutral, ceteris paribus, which of the following increases when the money supply growth rate increases and velocity is constant? A. real output growth real interest rates C. inflation nominal interest rates 25. Bonus-Select Option D on your Opscan.

Explanation / Answer

22. Nominal Interest Rate= Real interest rate + Inflation rate

Nominal interest rate=6+(-2) Here price is falling hence,-2

Nominal interest rate=6-2=4

Hence, option D i.e 4 percent is the answer

23.To increase the purchasing poer from saving,the real interest rate should also be high

So, take each case one by one using formula

Real Interest Rate=Nominal interest rate - Inflation rate,

So, (a)Real Interest Rate=10-8=2 percent

(b)Real Interest Rate=9-6=3 percent

(c)Real Interest Rate=7-2=5 percent

(d)Real Interest Rate=8-4=4 percent

So, from all the cases option c ...i.e Nominal interest rate=7% and inflation rate =2% is the answer,,as the real interest rate is high in this case

So, option C is the answer

24.when money is neutral ,nominal rate rates increases when the money supply growth rate increases and velocity is constant.

So, option D is the answer

25. Sorry, I didn't get it

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