If the Nominal Interest Rate Is 7

question 15

Multiple Choice

If the nominal interest rate is 7. 5% and the inflation rate is 4%, what is the real interest rate?

• A) 4%
• B) 9.5%
• C) 3.4%
• D) None of the above

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Definitions:

Expected-Utility Maximizer

An economic concept referring to an individual who chooses between uncertain prospects by comparing their expected utilities.

Bet

A wager or gamble where an individual risks a certain amount of money or valuables on the outcome of an uncertain event.

Random Variable

A variable whose possible values are outcomes of a random phenomenon, often used in probability and statistics.

Soft Drink

A non-alcoholic beverage usually carbonated, sweetened, and flavored, including sodas and cola drinks.