### Charges a nominal interest rate on loans equal

##### Reference no: EM131177035

Suppose the inflation rate is 2% and the real real return on investing in a machine is 3%. According to the Fisher equation, what should the nominal interest rate be? Suppose Bank A charges a nominal interest rate on loans equal to 6%. What will borrowers do? Suppose Bank B charges a nominal interest rate on loans equal to 4%. What will borrowers do?

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