If the Nominal Interest Rate Is 5 Percent and the Real

question 197

Multiple Choice

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation premium is

• A)8 percent.
• B)5 percent.
• C)3 percent.
• D)2 percent.

---

Definitions:

Price Ceiling

A government-imposed limit on how high a price can be charged for a product, intended to protect consumers from high prices.

Price Floor

A government- or authority-imposed minimum price that can be charged for a good or service, often above the equilibrium price.

Quantity Control

Regulatory or business practices that limit the production, sale, or distribution of products to influence market prices or quality.

Quota Rent

The earnings that accrue to the license-holder from owning the right to import a limited quantity of goods under a quota system.