If a Lender Desires to Earn a Real Return of 3

question 66

Multiple Choice

If a lender desires to earn a real return of 3 percent on a loan and the anticipated rate of inflation is 2 percent,the lender should charge a

• A)Real interest rate of 5 percent.
• B)Nominal interest rate of 5 percent.
• C)Real interest rate of 6 percent.

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Definitions:

Equilibrium

A condition where the supply and demand in the market are equal, leading to stable prices.

Marginal Product

The additional output that can be produced by adding one more unit of a specific input, holding all other inputs constant.

Value Of Marginal Product

describes the additional revenue generated from employing one more unit of input, such as labor or capital.

Wage Rate

The amount of compensation a worker receives per unit of time or per task performed, often expressed per hour or per piece.