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Consider two economies: A and B. The nominal interest rate is the same in both economies, but the ...

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Consider two economies: A and B. The nominal interest rate is the same in both economies, but the ...

Consider two economies: A and B. The nominal interest rate is the same in both economies, but the rate of inflation is higher in economy B. Which of the following statements will then be TRUE?

▸ The real interest rate will be higher in economy B.

▸ The number of borrowers in both economies will depend on whether the real interest rate is higher in economy A or economy B.

▸ The real interest rate will be higher in economy A.

▸ The real interest rate will be the same in both economies.

Textbook

Macroeconomics

Edition: 3^rd

Authors: Acemoglu, Laibson, List

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