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Relation between nominal interest rate, real interest rate and inflation
If we denote the nominal interest rate by R, the real rate by r and the expected inflation by pe then the real interest rate is defined by:
r= R- pe or R= r+ pe
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Q. Describe Nominal and real interest rates? To distinguish real interest rate from the ‘normal' interest rate, latter is termed as the nominal interest rate. Nominal interest
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Describe how price level evolves over time Using the time series we can study how price level evolves over time. If all prices rose by 2% during one month, price level would ri
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