What is meant by the equilibrium rate of interest

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Using the graph below of the supply of loan able funds, SLF, and the demand for loan able funds, DLF, discuss the following: a. What is meant by the equilibrium rate of interest? b. Illustrate and discuss how an autonomous increase in the expected rate of inflation will change the equilibrium nominal interest rate. Consider an initial real rate of interest of 3 percent and an expected inflation rate of 4 percent. If the expected rate of inflation rises to 6 percent with the real interest rate constant, what would the resulting nominal interest rate become, using the Fisher relationship?

Reference no: EM13881022

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