In Year 1 the Price Level Is Constant and the Nominal

question 35

Multiple Choice

In year 1 the price level is constant and the nominal rate of interest is 6 percent. But in year 2 the inflation rate is 3 percent. If the real rate of interest is to remain at the same level in year 2 as it was in year 1, then in year 2 the nominal interest rate must

• A) rise by 9 percentage points.
• B) rise by 3 percentage points.
• C) fall by 3 percentage points.
• D) rise by 6 percentage points.

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Definitions:

Maslow's Hierarchy

A psychological theory proposed by Abraham Maslow that categorizes human needs into a five-tier model, from basic (physiological) needs to higher-level (self-actualization) needs.

Needs

Fundamental requirements that individuals or groups must have met in order to function or survive.

Hierarchical

A structure or organization in which entities are ranked one above the other according to status or authority.

Family Life Cycle

A series of stages through which a family progresses over time, including events like marriage, parenthood, retirement, and the death of family members.