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Q. Nominal interest rate and expected inflation?
When we have inflation, we can't, of course, presume that expected inflation is zero. So real interest rate will no longer be equal to nominal interest rate and we should use R = r + pe. Expected inflation pe is exogenous (even though not essentially constant. In more advanced Keynesian models you would find numerous assumptions on how expectations are formed.
# ???? .. difference between gdp at market price and nnp at factor cost
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Q. Describe about consumption function? The consumption function Consumption C(r) is assumed to be negatively related to the real interest rate r
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