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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.
Inflation in Sweden Figure Inflation in Sweden 1830 - 2010. Source: SCB. There are four aspects which are interesting when we look at inflation data for Sweden
#question.WHAT IS GDP AND DIFFERENT PRICE LEVEL IN SHORT RUN?.
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