Assuming Inflation Is Positive,the Real Interest Rate

question 39

Multiple Choice

Assuming inflation is positive,the real interest rate

• A) must always be larger than the nominal interest rate.
• B) must always be smaller than the nominal interest rate.
• C) could be larger or smaller than the nominal interest rate,depending on the rate of inflation.
• D) would normally be larger than the nominal interest rate.
• E) increases exactly as fast as inflation.

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Definitions:

Normal Balance

Normal Balance refers to the typical or expected balance side (debit or credit) of an account based on double-entry bookkeeping principles.

Financial Statement

Formal records that outline the financial activities and condition of a business, including the balance sheet, income statement, and cash flow statement.

Permanent/Temporary

Refers to types of accounts in accounting, where permanent accounts show cumulative amounts that carry over to future periods, and temporary accounts are closed at the end of each period.

Normal Balance

The side (debit or credit) of an account on which increases to the account are recorded under double-entry accounting.