Examlex
Suppose you negotiate a one-year loan with a principal of $1000 and the nominal interest rate is currently 7%. You expect the inflation rate to be 3% over the next year. When you repay the principal plus interest at the end of the year, the actual inflation rate is 2.5%. Compute the ex ante and ex post real interest rate. Who benefits from this unexpected decrease in inflation? Who loses?
Relative Comparisons
The act of evaluating something in relation to another similar item.
Availability Heuristic
A cognitive shortcut that relies on the immediate examples that come to a person’s mind when evaluating a specific topic, concept, method or decision.
Representative Heuristic
A mental shortcut that involves making a probability judgement by comparing an object or event to a prototype of the object or event.
Additive Strategy
An approach where elements are added together to solve problems or make decisions, often seen in mathematics or decision-making processes.
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