1. Business
  2. Economics
  3. 1 consider the following data fro the us economy year...

Question: 1 consider the following data fro the us economy year...

Question details

1) Consider the following data fro the U.S economy.

Year Interest Rates Annual Inflation Rate
1981 14.03% 10.3%
1982 10.69% 6.2%
1983 8.63% 3.2%

a) Did borrowing costs rise or fall in the United States over the period? Explain your reasoning

b) Suppose in addition to the data given in question 1, you find a report from a bank dated 1981 that forecasts inflation increasing by 1% point in each of the following two years. What are the implied ex ante real interest rates?

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution