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Q. Nominal interest rate and expected inflation?
When we have inflation, we can't, of course, presume that expected inflation is zero. So real interest rate will no longer be equal to nominal interest rate and we should use R = r + pe. Expected inflation pe is exogenous (even though not essentially constant. In more advanced Keynesian models you would find numerous assumptions on how expectations are formed.
Changes in demand-Baby diapers and retirement villagesOther things equal, an increase in the number of buyers for a product or service will increase -demand. Baby diapers and retir
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