What effect would each of the following events likely have on the level of nominal interest rates

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Question 6

What effect would each of the following events likely have on the level of nominal interest rates?

a. Households dramatically increase their savings rate.

b. Corporations increase their demand for funds following an increase in investment opportunities.

c. The government runs a larger-than-expected budget deficit.

d. There is an increase in expected inflation.

Hint

Accounts and Finance" Nominal interest rate defines the interest rates before taking inflations into account. Besides, it defines the stated interest rates on loans, without taking into account compounding of interests. The nominal interest rate can be obtained by the following formula: r = m × [ ( 1 + i)1/m - 1 ]"...

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