If You Lend a Dollar for a Year and at the End

question 87

Multiple Choice

If you lend a dollar for a year and at the end of the year the price level has risen by 10 percent

• A) the purchasing power of your loan has risen over the year regardless of the interest rate at which you lent it.
• B) the purchasing power of your loan has remained constant over the year regardless of the interest rate at which you lent it.
• C) you must have earned a nominal interest rate of 10 percent to maintain the purchasing power of your loan.
• D) you must have earned a nominal interest rate of 5 percent to maintain the purchasing power of your loan.

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Definitions:

Thoracic

Relating to the thorax, the part of the mammalian body between the neck and the abdomen, housing primary organs such as the heart and lungs.

Lumbar

Referring to the lower back segment of the vertebral column, consisting of five vertebrae.

Sacral

Pertaining to the sacrum, the triangular bone at the base of the spine formed from fused vertebrae, important in the structure of the pelvis.

Cranial Nerves

Twelve pairs of nerves that originate in the brainstem and control motor and sensory functions of the head and neck.