Initially the Nominal Interest Rate Is 8 Percent and the Inflation

question 193

Multiple Choice

Initially the nominal interest rate is 8 percent and the inflation rate is 5 percent. People know that the inflation rate increases to 10 percent. What is the new nominal interest rate?

• A) 3 percent
• B) 13 percent
• C) 11 percent
• D) 8 percent

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Definitions:

Machine Hours

A measure of the amount of time a machine is operated, used in allocating manufacturing costs to units of product.

Finished Goods

Items that are finished being made but have not been purchased by consumers yet.

Cost of Goods Sold

The total cost of manufacturing or purchasing the goods that a company sold during a specific period.

Direct Labor Hours

The total hours of labor directly involved in producing goods or providing services, used in calculating labor costs and efficiency.