Answer Happy

4. Inflation and interest rates The following table shows the average nominal interest rates on six-month Treasury bills between 1997 and 2001, which determined the nominal Interest rate that the U.S. government paid when it issued debt in those years. The table also shows the inflation rate for the years 1997 to 2001. (All rates are rounded to the nearest tenth of a percent.) Year 1997 1998 1999 2000 2001 Nominal Interest Rate Inflation Rate (Percent) (Percent) 5.2 2.3 4.5 1.5 4.8 2.2 3.4 2.8 5.9 3.4 Source: "FRED Economic Data," Federal Reserve Bank of St. Louis, last modified September 23, 2019, accessed September 24, 2019, https://redstoursed.org. 60 On the following graph, use the orange points (square symbol) to plot the nominal interest rates for the years 1997 to 2001. Next, use the green points (triangle symbol) to plot the real interest rates for those years.

On the following graph, use the orange points (square symbol) to plot the nominal interest rates for the years 1997 to 2001. Next, use the green points (triangle symbol) to plot the real interest rates for those years. INTEREST RATE (Percent) 60 5.0 40 20 10 0 1900 1997 1996 1800 2000 YEAR 2001 2009 Nominal Interest Rate Real Interest Rate According to the table, in which year did buyers of six-month Treasury bills receive the highest real return on their investment? 1997 O 1998 ●

INTEREST RATE (Percent) 50 40 3.0 20 1.0 O 1996 1997 1998 1999 1997 1990 O2000 O2001 1999 YEAR 2000 According to the table, in which year did buyers of six-month Treasury bills receive the highest real return on their investment? 2001 2002 Nominal Interest Rate Real Interest Rate