If the Real Interest Rate Is 7 Percent and the Expected

question 8

Multiple Choice

If the real interest rate is 7 percent and the expected inflation rate is 2 percent, what would a person expect to have after a year?

• A) 5 percent more dollars, which will purchase 5 percent more goods
• B) 5 percent more dollars, which will purchase 7 percent more goods
• C) 9 percent more dollars, which will purchase 5 percent more goods
• D) 9 percent more dollars, which will purchase 7 percent more goods