In the late 1970s, the inflation rate was over 10 percent per year. Many home mortgage lending institutions had mortgages outstanding that had been made in the 1960s at nominal interest rates of around 5 percent per year
Many of these lending institutions failed. What can explain the high failure rate of lenders in the late 1970s?
The real interest rate the lenders were earning was 5 percent per year minus 10 percent per year inflation, making the real interest rate significantly negative, -5 percent per year. With the negative real interest rate, these financial institutions were incurring losses and eventually many were forced into bankruptcy.
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A period in which real GDP in the economy declines for at least six months is referred to as
A) a recession. B) living standards. C) long term growth. D) a positive fluctuation.
Brand Name Drug Industry Dynamics Market approval in the US for new pharmaceutical products is a long, arduous, and expensive process. Once approved, patent protection keeps close substitute products from entering for some years. If the demand for a particular product is stable, what would you predict for the profitability after approval and prior to patent expiration?