Which of These Is the Interest Rate That Would Exist

question 52

Multiple Choice

Which of these is the interest rate that would exist on a default-free security if no inflation were expected?

• A) nominal interest rate
• B) real interest rate
• C) default premium
• D) market premium

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Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, leading to market balance.

Demand Curve

is a graph showing the relationship between the price of a good or service and the quantity demanded by consumers, typically downsloping to indicate that lower prices increase demand.

Competitive Firm

A company that operates in a market with many competitors, facing a highly elastic demand curve for its product because many substitutes are available.

Supply Curve

A graphical representation showing the relationship between the price of a good or service and the quantity of that good or service that a supplier is willing and able to supply in the market.