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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.
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What do you mean by Gross Domestic Product? Gross Domestic Product: GDP stands for Gross domestic product, measures the value of all concluding goods and services produce
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production function
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