If the Nominal Rate of Interest Is 6 Per Cent

question 74

Multiple Choice

If the nominal rate of interest is 6 per cent and the real rate of interest is 10 per cent, the rate of inflation is _____.

• A) 4%
• B) -4%
• C) 3%
• D) -3%

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Definitions:

Exogenously

Originating from outside; determined by external factors not within the system.

Endogenously

Originating or produced from within a system, indicating a factor that is internal to an economic model or process.

Natural Rate

The unemployment rate at which the economy operates at full employment, where inflation is stable without accelerating.

Unemployment

A situation where individuals who are capable of working and are actively seeking a job are unable to find employment.