Comparing the Situation of a Nominal Interest Rate of 10

question 97

Multiple Choice

Comparing the situation of a nominal interest rate of 10 percent and an inflation rate of 9 percent with a nominal interest rate of 6 percent and inflation rate of 2 percent,consumers would borrow more in which situation?

• A)Nominal interest rate of 10 percent since real interest rate is 1 percent.
• B)Nominal interest rate of 6 percent since the real interest rate is 4 percent.
• C)Nominal interest rate of 10 percent since the real interest rate is 9 percent.
• D)Nominal interest rate of 6 percent since the real interest rate is 2 percent.

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Definitions:

Phineas Gage Matrix

Syndrome related to injury of the frontal cortex. Consists of cognitive dysfunctions (such as poor planning, inadequate decision-making, inability to take another’s perspective, and problems in sustaining employment) and emotional problems (such as shallow affect, lack of an enriched emotional life, lack of passion and initiative, and a diminished sense of pleasure and pain).

Frontal Lobe

The part of the cerebrum that is situated at the top front part of each hemisphere and controls voluntary muscle movements and higher-level cognitive functions such as planning, goal setting, and decision-making.

Emotional Intensity

The degree of strength or depth of an individual's emotional responses to situations or stimuli.

Social Referencing

The process by which individuals look to others in their environment for cues on how to react or behave in specific situations.