You take out student loans to help pay for your degree at a 5% annual interest rate. Assume the bank expected inflation to average 3% per year. a. What real interest rate did the bank expect to earn from your loan? The bank expected to earn % per year. b. What happens if inflation is actually 5% per year? If inflation is actually 5%, then the bank will earn % per year. c. If inflation is higher than expected, then better off. If it is lower than expected, then better off.

Crowding out is a phenomenon focused upon most by the macroeconomists of whereby a government deficit interest rates, which in turn private investment spending. this group also believed that fiscal policy is the only thing that can lower natural unemployment. is just as effective in countering recessions as monetary policy. can be used most of the time, but monetary policy becomes a better option when velocity is fluctuating. should be used only if the central bank follows a monetary policy rule. faces problematic lags in propagating changes throughout the economy.