Macroeconomics 5th Edition by Olivier Blanchard

Exercise 1

Using the information in this chapter, label each of the following statements true, false, or uncertain. Explain briefly.
a. As long as inflation remains roughly constant, the movements in the real interest rate are roughly equal to the movements in the nominal interest rate.
b. If inflation turns out to be higher than expected, the realized real cost of borrowing turns out to be lower than the real interest rate.
c. Looking across countries, the real interest rate is likely to vary much less than the nominal interest rate.
d. The real interest rate is equal to the nominal interest rate divided by the price level.
e. In the medium run, the real interest rate is not affected by money growth.
f. The Fisher effect states that in the medium run, the nominal interest rate is not affected by money growth.
g. The experience of Latin American countries in the early 1990s supports the Fisher hypothesis.
h. The value today of a nominal payment in the future cannot be greater than the nominal payment itself.
i. The real value today of a real payment in the future cannot be greater than the real payment itself.