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