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The Republic of Northern Lights, a small, stable country in the North Atlantic, is experiencing a negative inflation rate (deflation) at this time. The annual

The Republic of Northern Lights, a small, stable country in the North Atlantic, is experiencing a negative inflation rate (deflation) at this time. The annual inflation rate is -4 %. If the nominal rate of interest is 5%, what are the real interest rates that the Northern Lightians are getting as a reward for waiting? Use the approximate nominal interest rate equation and the true nominal interest rate equation to determine the rates.

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