Get the quarterly data from 1953 to 2009 on the three-month T-bill rate (CANSIM series V122541) and the total consumer price index (series V41690973) from the Textbook Resources area of the MyEconLab.

a. Calculate the (actual) annual inflation rate, using the formula'

b. Plot the nominal interest rate, it, and the inflation rate, π

c. Assume that the expected inflation rate is the same as the actual inflation rate (a restrictive assumption!) and calculate the real interest rate, i_r.

d. Plot the nominal and real interest rates on a graph.

e. What is the relationship between the nominal interest rate, i, and the real interest rate, i_r, over this period?

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TT₁ TT,= 4X 100 X (P₁-P)/P