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Lectur4-page12 - use your dollar to buy something Does that make sense to you If you are not spending your dollars on goods and services today then

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If $1 in your hand right now has the same value to you as $1.05 a year from now, guaranteed, with zero inflation; then the real rate of interest that you would accept to defer consumption today for one year would be 5 percent. Think of the real rate of interest as what someone would have to pay you guaranteed, with no inflation, to not use your dollar today, but to wait one year to
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Unformatted text preview: use your dollar to buy something. Does that make sense to you? If you are not spending your dollars on goods and services today, then you are saving your dollars for later consumption. What real rate of interest will convince you not to spend your money today, but save it for at least one year? 12...
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This note was uploaded on 12/29/2011 for the course ECO 210 taught by Professor Malls during the Fall '10 term at SUNY Stony Brook.

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