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dimaraw [331]
3 years ago
14

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
Business
2 answers:
kumpel [21]3 years ago
4 0

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:

<em>Real interest rate = nominal interest rate - inflation rate</em>

<em>Real interest rate = 5% - 7%</em>

<em>Real interest rate = -2%</em>

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.


qaws [65]3 years ago
3 0

<u>The friend will be earning–(2)%. </u>

<u>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)%. </u>

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.

<u>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)%. </u>

<u> </u>

Learn more:

1. Interview faults:

<u>brainly.com/question/2070761 </u>

<u> </u>

2. Charging fee in case of credit card

<u>brainly.com/question/2668305 </u>

<u> </u>

3. Consequences of non-payment of monthly credit card payment

<u>brainly.com/question/3211811 </u>

<u> </u>

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.

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