Suppose You Have $100 to Invest for a Year and the Nominal

question 97

Multiple Choice

Suppose you have $100 to invest for a year and the nominal interest rate is 7 percent. If the inflation rate during the year is 4 percent, at the end of the year your nominal gain from the investment is

• A) $3.
• B) $4.
• C) $7.
• D) $11.

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Definitions:

Loss-Minimizing Strategy

An approach aimed at reducing the amount of loss incurred in a business or investment.

AVC

The average variable cost is calculated by dividing the total variable costs by the produced output quantity.

Marginal Revenue

The increase in revenue that results from the sale of one additional unit of output.

Average Variable Cost

The total variable costs divided by the quantity of output produced, representing the variable cost per unit.