Year 1: nominal interest rate 5.5%, expected inflation 3%Year 2: nominal interest rate is expected to increase by 50 basis points and expected…
§Year 1: nominal interest rate 5.5%, expected inflation 3%§Year 2: nominal interest rate is expected to increase by 50 basis points and expected inflation to decline to 1%.Have the real interest rate changed from year 1 to year 2? By how much? Explain
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