Q7) At T1, an economy is in long-run equilibrium at a real interest rate of 4%, a price level of 100, and with an expected inflation rate of 0%. If in T2 the actual price level is 95, then in that time period: A) r=4%, i = 4% B) r9%, i -1% C) r= -1%, i 4% Dr= -1%, i 9%

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Q7) At T1, an economy is in long-run equilibrium at a real interest rate of 4%, a price level of 100, and
with an expected inflation rate of 0%. If in T2 the actual price level is 95, then in that time period:
A) r = 4%, i = 4%
B) r= 9%, i -1%
C) r= -1%, i 4%
Dr= -1%, i 9%
1
Transcribed Image Text:Q7) At T1, an economy is in long-run equilibrium at a real interest rate of 4%, a price level of 100, and with an expected inflation rate of 0%. If in T2 the actual price level is 95, then in that time period: A) r = 4%, i = 4% B) r= 9%, i -1% C) r= -1%, i 4% Dr= -1%, i 9% 1
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