Consider a simple economy that produces only three products: hot dogs, torches and golf balls. Use the information in the following table to calculate the inflation rate for 2020, as

Consider a simple economy that produces only three products: hot dogs, torches and golf balls. Use the information in the following table to calculate the inflation rate for 2020, as measured by the consumer price index. Now assume an investor is negotiating with a bank to obtain a loan for business. The bank offers her two options: (i) take a loan with 1.5% real interest rate or (ii) take a loan with 2.0% nominal interest rate. Will she be better off with the first or the second choice? Explain carefully.

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