Which of the Following Combinations of Nominal Interest Rates and Inflation

question 220

Multiple Choice

Which of the following combinations of nominal interest rates and inflation implies a real interest rate of 7 percent?

• A)a nominal interest rate of 5 percent and an inflation rate of 4 percent.
• B)a nominal interest rate of 4 percent and an inflation rate of 3 percent.
• C)a nominal interest rate of 8 percent and an inflation rate of 1 percent.
• D)a nominal interest rate of 14 percent and an inflation rate of 2 percent.

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Definitions:

Bottom Line

The final net income reported by a company, indicating the company's profitability, or metaphorically, the most important or fundamental aspect of a situation.

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Outsourcing

The business practice of hiring external vendors to perform services or produce goods traditionally handled within the company.