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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.
Granting a loan: When commercial banks lend, they create money. This can be explained by extending the hypothetical example of Bank
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ISSUES RELATED TO BALANCE OF PAYMENTS: It is to be remembered that the Indian economy witnessed varying intensities of BOP problem during 1956-9 1. However over the 1990s,
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