$2500 Is Borrowed from a Bank That Charges 10% Simple

question 134

Multiple Choice

$2500 is borrowed from a bank that charges 10% simple interest. If the money is repaid in 5 1/2 years, how much must be paid back?

• A) $3885
• B) $3865
• C) $3875
• D) $3855

---

Definitions:

Credible Policy

A policy considered by participants in the economy to be likely implemented and maintained over time, thereby influencing their economic decisions.

Lower Inflation

A decrease in the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is increasing.

Effectiveness Lag

The delay between the implementation of a policy and the time it takes for the policy's effects to manifest in the economy.

Monetary Policy

Economic strategy chosen by a government's central bank to control the money supply, aiming at achieving macroeconomic goals such as controlling inflation, consumption, growth, and liquidity.