Given a Nominal Rate of Interest, the Real Rate of Interest

question 21

Multiple Choice

Given a nominal rate of interest, the real rate of interest can be computed by

• A) multiplying the nominal rate by a price index for the year being studied.
• B) subtracting the rate of growth of the economy.
• C) subtracting the expected rate of growth of prices in the future.
• D) multiplying the nominal rate by the ratio of contemporaneous inflation and unemployment.
• E) none of the above.

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