You Borrow Some Amount of Money for Five Years at a Fixed

question 99

Multiple Choice

You borrow some amount of money for five years at a fixed rate of 4 percent.For the first three years,inflation is 3 percent,and for the last two years,deflation is 3 percent.Based on this information,your

• A) real rate of interest was larger than your nominal rate only for the last two years.
• B) real rate of interest was larger than your nominal rate only for the first three years.
• C) real rate of interest exceeded your nominal rate for the entire five years.
• D) nominal rate of interest exceeded your real rate for the entire five years.
• E) nominal rate of interest equaled your real rate for the entire five years.

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Definitions:

Coffee

A popular beverage made from roasted and ground bean seeds, known for its stimulating effect due to caffeine.

Diminishing Marginal Utility

The decline in the additional satisfaction a person derives from consuming one more unit of a good or service.

Demand Curves

A graphical representation showing the relationship between the price of a good and the quantity of that good that consumers are willing and able to purchase at various prices.

Supply Curves

A graphical representation showing the relationship between the price of a good and the quantity supplied at those prices.