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Unformatted text preview: a. Real rate = Nominal interest rate expected rate of inflation 2. Deflating a. Convert nominal values into real ones b. Application: Minimum Wagehigher in 1969 or 2009? 3. Indexing a. Adjust nominal values to hold real values constant b. Application: Social Security benefits E. True Costs of Inflation: NOT loss of purchasing power, rather. .. 1. Interference with long-run planning a. Increased fluctuation in inflation rates = increased risk in borrowing and lending b. Fisher Effect: nominal interest rates and inflation rates III. NEXT TIME A. Chapter 23: National Income Accounting...
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- Spring '07