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If expected inflation increases interest rates are likely to increase?
Wiki User
∙ 14y ago
Yes, inflation and increases in interest rates usually go hand-in-hand, though inflation is not the sole cause of an increase in interest rates
Wiki User
∙ 14y ago
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What is nominal interest rate minus the expected rate of inflation?
The expected real interest rate.
The one year nominal interest rate is 7.97 and the real interest rate is 3.54 what is the expected inflation rate?
The expected inflation rate is 11.51%
When inflation increases interest rates go .?
duck it
Suppose a borrower and lender agree on the nominal interest rate to be paid on a loan and the inflation turns out to be higher than they expected Is the real interest rate on this loan higher?
the real interest rate equals nominal interest rate minus inflation rate. In the situation the inflation rate increase and the nominal interest rate remains unchanged, therefore the real interest rate must decrease.
If interest rate increases will inflution increase or decrease?
If interest rate increases will inflution increase or decrease?"
What is nominal interest rate minus the expected rate of inflation?
The expected real interest rate.
The one year nominal interest rate is 7.97 and the real interest rate is 3.54 what is the expected inflation rate?
The expected inflation rate is 11.51%
When inflation increases interest rates go .?
duck it
Suppose a borrower and lender agree on the nominal interest rate to be paid on a loan and the inflation turns out to be higher than they expected Is the real interest rate on this loan higher?
the real interest rate equals nominal interest rate minus inflation rate. In the situation the inflation rate increase and the nominal interest rate remains unchanged, therefore the real interest rate must decrease.
If interest rate increases will inflution increase or decrease?
If interest rate increases will inflution increase or decrease?"
What is the relationship between demand for money and interest rates?
as interest rates increase, demand for money increases.
What happens to the future value of money when the inflation rate exceeds the interest rate?
it increases
What happens to the future value of money when the inflation exceeds the interest rate?
it will increase
Does the precautionary demand for money decreases as the interest rate decreases?
Decreases when the inflation rate increases
A decline in interest rates is expected to?
increase economic growth
What effect does an increase in the money supply have on inflation?
An increase in the money supply shifts the money supply curve to the right. If you look on your graph, you will see that an increase in money supply will cause the interest rate to decrease. Here's why: Fed increases money supply-->excess supply of money at the current interest rate -->people buy bonds to get rid of their excess money-->increase in the prices of bonds --> decrease in the interest rate.
If the inflation premium for a bond goes up the price of the bond?
The price of the bond decreases; the inflation premium would increase the market interest rate, which in bond valuation is located in the denominator, and the coupon payment rate is located in the numerator. When calculating the NPV of future coupon payments, as the denominator or market interest rate + inflation premium increases, the Net Present Value of future coupon payments decreases and the overall value of the bond decreases as well. The price of the bond decreases; the inflation premium would increase the market interest rate, which in bond valuation is located in the denominator, and the coupon payment rate is located in the numerator. When calculating the NPV of future coupon payments, as the denominator or market interest rate + inflation premium increases, the Net Present Value of future coupon payments decreases and the overall value of the bond decreases as well.
