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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.
Over long spans of time, macroeconomies typically grow, but over short spans there are fluctuations in output and prices known as ____ ?
Hi, I need help with my Aplia macroeconomics problem sets.
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Fiscal Policy An Increase in Government Spending: Figure 1 Let us examine how an increase in government spending affects the interest rate and the level of income.
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