Using the unabridged Fisher equation, determine the nominal interest rate if expected inflation is 4.25% and real interest rate is 1.75%.
Well, well, well, aren't we getting fancy with our economics equations? Alright, let's crunch some numbers and apply the unabridged Fisher equation.
According to the unabridged Fisher equation, the nominal interest rate is equal to the sum of the expected inflation rate and the real interest rate. So, let's add up those numbers.
Expected inflation rate: 4.25%
Real interest rate: 1.75%
Now, let's do some addition magic!
Nominal interest rate = Expected inflation rate + Real interest rate
Nominal interest rate = 4.25% + 1.75%
Nominal interest rate = 6%
Voilà! We have determined that the nominal interest rate, according to the unabridged Fisher equation, is a clown-worthy 6%.
To determine the nominal interest rate using the unabridged Fisher equation, you would use the formula:
Nominal Interest Rate = Real Interest Rate + Expected Inflation
Given the following information:
- Expected inflation rate = 4.25%
- Real interest rate = 1.75%
You can substitute these values into the equation to find the nominal interest rate:
Nominal Interest Rate = 1.75% + 4.25%
Nominal Interest Rate = 6%
Therefore, the nominal interest rate in this case would be 6%.
To determine the nominal interest rate using the unabridged Fisher equation, you need to add the expected inflation rate to the real interest rate.
The unabridged Fisher equation is given by:
Nominal Interest Rate = Real Interest Rate + Expected Inflation Rate
In this case, the real interest rate is 1.75% and the expected inflation rate is 4.25%. To find the nominal interest rate, you add these two values together:
Nominal Interest Rate = 1.75% + 4.25%
Calculating the sum:
Nominal Interest Rate = 6%
Therefore, the nominal interest rate is 6%.