To Obtain a Given Real Rate of Return, Lenders Must

question 136

Multiple Choice

To obtain a given real rate of return, lenders must charge a ________ nominal interest rate in the face of increasing inflation.

• A)deflated
• B)higher
• C)lower
• D)constant

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Definitions:

Fixed Costs

Costs that do not change with the level of production or sales, such as rent and insurance.

Break-even Sales

The amount of revenue needed to cover both fixed and variable costs, resulting in zero net income or loss.

Variable Costs

Expenses that change in proportion to the activity or volume of production or sales, such as raw materials and direct labor.

Break-even Point

The point at which total revenues equal total expenses, indicating that a business is neither making a profit nor incurring a loss.