Material Detail

This case quantifies real interest rates over time. This activity can be used as either (a) an instructor-led example in which the instructor shows –either on paper or a screen– the data and students analyze them, or (b) as a student exploration in which students find the specified data. Instructors with less time could use option (a) and instructors interested in their students learning about the FRED database could use option (b).This activity plots a nominal interest rate (e.g. the 30-Year Conventional Mortgage Rate), a price index (e.g. the Consumer Price Index for All Urban Consumers), and –after expressing the price index in growth rates- computes the difference between the two of them. This difference is the real interest rate and its secular trend and its cyclical behavior can be compared to those of the nominal interest rate.

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