If the Nominal Interest Rate Is 1 Percent and the Inflation

question 46

Multiple Choice

If the nominal interest rate is 1 percent and the inflation rate is 5 percent, the real interest rate is:

• A) 1 percent.
• B) 6 percent.
• C) -4 percent.
• D) -5 percent.

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Definitions:

Propinquity Effect

The tendency for people to form friendships or romantic relationships with those whom they encounter often, making physical proximity a factor in relationship formation.

Waist-to-Hip Ratio

A measurement used to assess the distribution of body fat, calculated by dividing the waist circumference by the hip circumference.

Income

Money received, typically on a regular basis, for work or through investments.

Preferences

Individual choices or inclinations towards certain opinions, objects, or outcomes over others.