Suppose the canadian economy on a fixed exchange rate has a, Ask an Expert

Economics

Suppose the Canadian economy, on a fixed exchange rate, has a real growth rate of 2% and is in equilibrium with an inflation rate of 10% and a risk premium of 1%. Suppose changes in the U.S. cause its real rate of interest to increase from 3% to 4% and its inflation rate to incresase by 3 percentage points. When the Canadian economy has settled to a new equilibrium after this change, what is its nominal interest rate?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91521580

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