Suppose That at a Given Point in Time the Rate

question 62

Multiple Choice

Suppose that at a given point in time the rate of inflation in the economy is equal to 2 percent and the nominal interest rate is 5 percent. What is the real interest rate consistent with this situation?

• A)2 percent
• B)-3 percent
• C)3 percent
• D)7 percent
• E)None of these

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Definitions:

Marginal Utility

The additional satisfaction or utility a consumer receives from consuming one more unit of a good or service.

Maximize Utility

The process or goal of obtaining the highest level of satisfaction or benefit from consuming goods and services, given a consumer's limitations, such as income or resources.

Income

The financial gain received by an individual or entity, typically measured over a period of time, deriving from labor, investment, or business ventures.

Marginal Utility

The additional satisfaction or benefit received by consuming one more unit of a good or service.