If the Expected Inflation Rate Is 3 Percent and Banks

question 207

Multiple Choice

If the expected inflation rate is 3 percent and banks charge a 10 percent money rate of interest, the real rate of interest is

• A) 3 percent.
• B) 7 percent.
• C) 10 percent.
• D) 17 percent.

---

Definitions:

Outcomes

The results or consequences of an action, process, or scenario.

Special-Interest Effect

Any political outcome in which a small group (“special interest”) gains substantially at the expense of a much larger number of persons who each individually suffers a small loss.

Government Policy

refers to the actions taken by a government to address issues or achieve goals, which may involve regulations, laws, or spending priorities.