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Question 1 (25 marks) (a) What is the difference between real and nominal interest rate. Asssume that currently (2021) the prime interest rate is 3.45%,

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Question 1 (25 marks) (a) What is the difference between real and nominal interest rate. Asssume that currently (2021) the prime interest rate is 3.45%, and ination rate is 2.8%. Also assume that people expect that ination will average 3.0% in 2022. Calculate ex-ante real interest rate and expost real interest rate based on the above information. Show all your steps/work. 5 marks

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