Suppose sally borrows $1,000 from harry for one year and agrees to pay a nominal interest rate of 9%. when she borrows the money, both she and harry expect an inflation rate of 6%. 1st attempt part 1 (0.3 point)see hint the expected real interest rate on the loan is %. part 2 (0.3 point)see hint suppose that when sally pays back the loan after one year, the actual inflation rate turns out to be 7%. the actual real interest rate on

Instructions are listed below

Explanation:

Giving the following information:

Suppose Sally borrows $1,000 from Harry for one year and agrees to pay a nominal interest rate of 9%. When she borrows the money, both she and Harry expect an inflation rate of 6%. Suppose that when Sally pays back the loan after one year, the actual inflation rate turns out to be 7%.

Real rate= nominal rate - inflation rate

At the beginning of the loan, the expected real rate is:

Real rate= 9 - 6= 3%

The actual rate is:

Real rate= 9 - 7= 2%

The answer is letter C. There is a recession. It is a temporary economic decline when trade and business activities are lessened which leads to the GDP of the country to reduce in numbers. If the decline would last for at least 6 months, this will cause a major impact on the real GDP,