The Market Interest Rate in Alpha Is 7%, and the Market

question 80

Multiple Choice

The market interest rate in Alpha is 7%, and the market interest rate in Beta is 10%; the inflation rate in Alpha is 3%, and inflation rate in Beta is 8%.Which of the following statements is true?

• A)The real interest rate is higher in Alpha, but the nominal interest rate is higher in Beta.
• B)The real interest rate is higher in Beta, but the nominal interest rate is higher in Alpha.
• C)Both the real and nominal interest rates are higher in Alpha.
• D)Both the real and nominal interest rates are higher in Beta.

---

Definitions:

Monopolistically Competitive

A market structure in which many companies sell products that are similar but not identical, allowing for competition based on quality, price, and brand.

Differentiated Product

A product that is distinct from other similar products based on qualities like design, quality, or features, often achieved through branding and marketing.

Barriers

In economic terms, barriers typically refer to obstacles that impede the flow of goods, services, capital, or labor across borders, such as tariffs, quotas, or regulations.

Monopolistic Competitor

A firm that operates in a market structure characterized by many competitors selling differentiated products.