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:

T Accounts

A representation in accounting used to track the increases and decreases in individual financial statement items.

Direct Labour Hours

The total hours worked by employees that can be directly associated with the production of goods or services.

Finished Goods

Manufactured items that are completed and ready for sale but have not yet been sold to customers.