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8. Real and nominal interest rates: Suppose the real return on investing in a machine is 5% and the ination rate is 4%. (3) According
8. Real and nominal interest rates: Suppose the real return on investing in a machine is 5% and the ination rate is 4%. (3) According to the Fisher equation, What should the nominal interest rate be? (h) Suppose bank A charges a nominal interest rate on loans equal to 8%. What happens? (c) Suppose bank B advertises its nominal rate on savings accounts as 12%. What happens? Use quarterly values for all your calculations (i.e last quarter of 1981). For Monetary Base use BOGMBASE. For Currency: Monetary Base; Cur- rency in Circulation (MBCURRCIR); For the actual inflation rate: Gross Domestic Product: Implicit Price Deflator (GDPDEF); For GDP - Gross Domestic Product (GDP)
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