A Plausible Example of a Perfect Substitute Is

question 115

Multiple Choice

A plausible example of a perfect substitute is:

• A) left and right shoes
• B) coke and pepsi cola
• C) cars and bicycles
• D) apples and chicken

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Definitions:

Real Interest Rate

The interest rate that has been modified to account for inflation, showing the real cost of borrowing or the genuine investment return.

Fisher Effect

an economic theory proposing that the real interest rate is independent of monetary measures, especially the nominal interest rate and inflation rate.

Nominal Interest Rate

The rate of interest before adjustment for inflation; the stated or advertised interest rate on a loan or investment.

Real Interest Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing and the true yield on lending.