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Unformatted text preview: 5% rate of return for the year. a. If you make the loan in the base year, and you expect the inflation rate to be 10% over the year, what nominal rate of interest should you charge your roommate? b. If you charge the interest rate you determined in part a, but the actual inflation rate was 12%, what was your real rate of return on the loan? 2. Suppose that the following equations describe the economy of the country of Iota. C = 500 + 0.8 ( Y – T ) I p = 200 G = 300 NX = 50 T = 200 Y * = 5000 Use this information to find each of the following: a. Autonomous expenditure. b. The multiplier. c. Short-run equilibrium output. d. The output gap. 3. By how much would aggregate expenditure have to change to eliminate the output gap for Iota in question 2 above?...
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This note was uploaded on 01/28/2011 for the course ECON 104 taught by Professor Voss during the Winter '10 term at University of Victoria.
- Winter '10