CH8-24.03.09 - -The real value decreases If interest rate...

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24.03.2009 CHAPTER 8 MACROECONOMIC INSTABILITY Redistribution Effects of Inflation Enflasyon geliri toplumdan yeniden dağıtır. Bir kısım zenginleşir, bir kısım fakirleşir. Nominal Income: Income in monetary terms such as my wage is 10 00 TL. Real Income: It is purchasing power of the income. It shows what income can buy. Example: During the inflation period, we assume that inflation is 10% If NI remain the same, RI? (Decreases) If NI i ncreases 5%, RI? (Decreases) If NI increases 10%, RI? (Remain the same) Savers (Tasarrufçular): Unanticipated inflation hurt savers. Example: 100 million TL in 2008 (no interest) 10% inflation in 2008 What effect of inflation on savers?
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Unformatted text preview: -The real value decreases. If interest rate is 10%, what happen? -The real value of saving remains the same. Nominal Interest Rate: Bankanın verdiği (ilan ettiği) faiz oranı. Real Interest Rate: The percentage increase in purchasing power that the borrower pays the lender. Real Interest Rate=Nominal Interest Rate-Inflation Rate Example: If no interest, a debtor borrows money from a creditor , who has an advantage? -Assume tha t debt is $100 and yearly inflati on is 10%. A year later , the real value of this money is $90 . Debtor has an advantage. Anticipated Inflation (expected), unanticipated inflation (unexpected)...
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