If Inflation Is 10% and the Nominal Interest Rate Equals

question 11

Multiple Choice

If inflation is 10% and the nominal interest rate equals 16.6% the real interest rate is equal to

• A) 6.6%.
• B) 6%.
• C) -6.6%.
• D) zero.

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Definitions:

Average Variable Cost

Average variable cost is the total variable costs of production divided by the quantity of output produced; it changes with production volume.

Marginal Cost

The expenditure required to produce one more unit of a product or service.

Incremental Cost

The additional cost associated with producing one more unit of a product or service.

Additional Unit

The next unit of product or service to be produced beyond the current production level, often considered in the context of marginal cost analysis.