11. Measuring the Cost of Living . The Cost of Living. We need all sorts of things to live These things are typically not free So, what’s the cost of living the way we actually live? That is, what’s the cost of buying the things we buy?. Why Do We Need to Know the Cost of Living?.
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Measuring the Cost of Living
Real interest rate = Nominal interest rate – Inflation
=15% - 10% = 5%
Nominal interest rate (3-month Treasury Bills)
Real interest rate