Question

1. Given the nominal interest rate of 17% and the expected inflation of 13%, then the value of the real interest rate is ___ ? 2. With the real interest rate equal to 3% and the expected inflation equal to 4%, then the value of the nominal interest rate is___? 3. A lender prefers a (high or lower) real interest rate while a borrower prefers a (higher or lower) real interest rate higher low real interest rate. 

          1. Given the nominal interest rate of 17% and the expected inflation of 13%, then the value of the real interest rate is ___ ?
2. With the real interest rate equal to 3% and the expected inflation equal to 4%, then the value of the nominal interest rate is___?
3. A lender prefers a (high or lower) real interest rate while a borrower prefers a (higher or lower) real interest rate higher low real interest rate.
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Principles of Economics
Principles of Economics
Gregory Mankiw 8th Edition
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1. Given the nominal interest rate of 17% and the expected inflation of 13%, then the value of the real interest rate is ___ ? 2. With the real interest rate equal to 3% and the expected inflation equal to 4%, then the value of the nominal interest rate is___? 3. A lender prefers a (high or lower) real interest rate while a borrower prefers a (higher or lower) real interest rate higher low real interest rate.
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Transcript

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00:04 So the coefficient equation, this is given as the real rate of interest that is equal to the nominal interest rate, subtract the inflation rate.
00:33 So in part one here, what we're told is our nominal interest rate, that's 17%, and our expected inflation of 13%, where r, the real rate is equal to 17, subtract 13, which gives us 4%.
00:53 Using that equation at the top.
00:56 Looking at part two here, we're given r, that's 3%.
00:58 And we're given i, that's 4%.
01:01 And so what we have is 3 is equal to n minus 4...
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