If the CPI Is 170 at the Beginning of the Year

question 71

Multiple Choice

If the CPI is 170 at the beginning of the year and 181 at the end, and a bank is paying a nominal interest rate of 6 percent, we see that

• A)the interest nominal rate is negative.
• B)the real interest rate is positive and is larger than 1 percent.
• C)the real interest rate is negative.
• D)the real interest rate is positive and is less than 1 percent.
• E)the real interest rate is equal to zero.

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Definitions:

Sectoral Shifts

Changes in the economic landscape that cause resources to be allocated differently across various sectors of the economy.

Structural Unemployment

A form of unemployment caused by a mismatch between the skills held by the unemployed and the skills demanded by the prevailing job market.

Natural Rate Of Unemployment

The level of unemployment consistent with a stable rate of inflation, where labor market is in equilibrium.

Unemployed Workers

Individuals who are without a job but are actively seeking employment.