Respuesta :
Answer:
If inflation is expected to be 7% this next year, your friend will be earning a -2% interest.
Step-by-step explanation:
Real interest rate is the interest rate that takes inflation into account. To calculate for the real interest rate, we have:
Real interest rate = nominal interest rate - inflation rate
Real interest rate = 5% - 7%
Real interest rate = -2%
In this case, the borrower will get paid and your friend will be the one penalized.
Negative interest rates occur infrequently and usually only when a country's central bankers are forced to utilize the monetary policy tool -- where the interest rates are set below zero -- during harsh economic times.
The friend will be earning–(2)%.
The friend has just started a savings account that is currently paying 5% interest. If inflation is expected to be 7% this next year, friend will be earning–(2)%.
Further explanation:
Real interest rate:
It is an interest rate that is being allowed by the saver, investor receives after allowing the inflation.
Calculate the real interest rate:
Real interest rate = Nominal interest rate - Inflation rate
Real interest rate = 5% - 7%
Real interest rate = -2%
The borrower will get paid and a friend will be penalized.
Negative interest rates occur only when central banks are forced to utilize the monetary policy tool.
Thus, the friend has just started a savings account that is currently paying 5% interest. If inflation is expected to be 7% this next year, friend will be earning –(2)%.
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Answer details:
Grade: High School
Subject: Economics
Chapter: Inflation
Keywords: Your friend has just started a savings account that is currently paying 5% interest. If inflation is expected to be 7% this next year, your friend will be earning a, penalized, real interest rate, negative interest rates.
