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Inflation affects creditors and debtors. Suppose the Canadian debtors borrowed $100 from the Canadian creditors on December 31, 1992 and promised to pay back $105 on December 31, 1993. This is equivalent to paying back a nominal interest rate of 5%.
a) Find the real interest rate, which is defined as real interest rate = nominal interest rate - inflation rate.
b)Do the creditors gain or lose from this transaction? Explain.
c)If the debtors want to borrow $100 again on December 31, 1993, what must be the minimum nominal interest rate that the debtors have to offer to pay the creditors on December 31, 1994, if your numerical answers above are known to everyone? Explain.
With the per-unit prices of broccoli (B) and pork rinds (R) equal to $2 and $1 respectively, a consumer George, with an income of $1,000 purchases 400R and 300B. At that point, the consumer's MRSBR = 2R/1B.
Find all Nash equilibria (if any) in pure strategies (PNE). Your answer should include strategies and equilibrium payoffs associated with your PNE.3. Find all Nash equilibria (if any) in mixed strategies (MNE).
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the most efficient production technology available for making vitamin pills has the cost structure given in the following table. Note that output is measured as the number of bottles of vitamins produced per day and that costs include a normal pro..
In late 1990s more than twenty-five domestic steel firms have filed for bankruptcy. A combination of low values with strong competition through foreign competitors and so-called legacy expenses of unions are cited as the primary reason why so many s..
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