Suppose That You Lend Me $100 for a Year,and That

question 76

Multiple Choice

Suppose that you lend me $100 for a year,and that I agree to pay you $110 at that time (principal plus interest) .Over the intervening year,however,the average price of goods in the economy falls by 4%.The real rate of return that you will earn on your loan to me is therefore equal to

• A)10%.
• B)4%.
• C)14%.
• D)greater than 14%.
• E)6%.

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