The Effects of Real vs. Nominal Interest Rates on Investment: A Classroom Exercise
AbstractAccording to Kennedy (2000), the difference between real and nominal interest rates constitutes the most important concept taught in macroeconomics courses. The classroom exercise described in this article demonstrates one way in which real and nominal interest rates differ, namely in their effect on aggregate investment. Students assume the roles of borrowers and lenders who have the opportunity to undertake productive investment projects. By negotiating loans with each other and making their individual investment decisions, students generate aggregate data which they then analyze. In their analysis, they see how real versus nominal interest rates affected aggregate investment. The exercise uses a non-computerized double oral auction which takes 35-50 minutes to run, and works with classes of 12 to 60 students.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoArticle provided by Missouri Valley Economic Association in its journal The Journal of Economics.
Volume (Year): 29 (2003)
Issue (Month): 1 ()
Find related papers by JEL classification:
- A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ken Brown).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.