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Homework answers / question archive / 13) Suppose that the nominal interest rate in Japan is 10

13) Suppose that the nominal interest rate in Japan is 10

Economics

13) Suppose that the nominal

interest rate in Japan is 10.4%. In addition, the inflation rate is

equal to 4.2%.

Given this information, what is the real interest rate in Japan?

14. Suppose that a typical doctor earned $41,000 in 1978. In addition, you know that in 1990 a

typical doc

tor earns $76,000. Finally, you also know that the CPI in 1978 is 210 and in 1990 is

230.

Given this information, a doctor's 1978 salary in 1990 dollars is $

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13.)

Given,

Nominal interest rate = 10.4%

Rate of Inflation = 4.2%

So,

 

Real interest rate = Nominal interest rate - Inflation rate

Real interest rate = 10.4 - 4.2

Real interest rate = 6.2%

 

14.)

Given,

Salary in 1978 = 41000

Salary in 1990 = 76000

CPI in 1978 = 210

CPI in 1990 = 230

So,

 

The 1978 salary of the doctor in 1990 dollars is as follows;

= 41000*230/210

= 44905

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