Questions
Questions

ECON 13210 94 Introduction to Macroeconomic Models Final Exam

Multiple choice

Which of the following are correct expressions of the Fisher equation? (Select all that apply)

Options
A.𝑟 𝑡 ≈ 𝑅 𝑡 − 𝜋 𝑡
B.𝑟 𝑡 ≈ 𝑅 𝑡 + 𝜋 𝑡
C.( 1 + 𝑟 𝑡 ) = ( 1 + 𝑅 𝑡 ) 𝑃 𝑡 + 1 1 𝑃 𝑡
D.( 1 + 𝑟 𝑡 ) = 1 𝑃 𝑡 ( 1 + 𝑅 𝑡 ) 𝑃 𝑡 + 1
E.( 1 + 𝑟 𝑡 ) = ( 1 + 𝜋 𝑡 ) ( 1 + 𝑅 𝑡 )
F.( 1 + 𝑟 𝑡 ) = ( 1 + 𝑅 𝑡 ) ( 1 + 𝜋 𝑡 )
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Step-by-Step Analysis
The question asks which expressions are correct representations of the Fisher equation, and to select all that apply. We will evaluate each option in turn to see whether it matches the standard Fisher framework. Option 1: r_t ≈ R_t − π_t. This is the usual first-order approximation derived from (1 + r_t) ≈ (1 + R_t)(1 + π_t). If you expand that product and drop the higher-order term R_t π_t, you indeed get r_t ≈ R_t − π_t. This makes Option 1 a correct approximate expre......Login to view full explanation

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Similar Questions

If the nominal interest rate is 7% p.a and the real rate of interest is 4% p.a, the expected inflation rate will be approximately

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