Suppose the canadian economy on a fixed exchange rate has a


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 increases by 3 percentage points. When the Canadian economy has settled to a new equilibrium after this change, what is its nominal interest rate?

Request for Solution File

Ask an Expert for Answer!!
Business Economics: Suppose the canadian economy on a fixed exchange rate has a
Reference No:- TGS01133735

Expected delivery within 24 Hours