Problem
Real and nominal interest rates: Suppose the real return on investing in a machine is 5% and the inflation rate is 4%.
(a) According to the Fisher equation, what should the nominal interest rate be?
(b) Suppose bank A charges a nominal interest rate on loans equal to 8%. What happens?
(c) Suppose bank B advertises its nominal rate on savings accounts as 12%. What happens?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.