If Inflation Is 8 Per Cent and the Real Interest

question 16

Multiple Choice

If inflation is 8 per cent and the real interest rate is 3 per cent, then the nominal interest rate must be

• A) 3/8 per cent.
• B) -5 per cent.
• C) 5 per cent.
• D) 11 per cent.
• E) 24 per cent.

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Definitions:

Activity Variance

The difference between budgeted and actual activity levels, used in managerial accounting to monitor performance and control costs.

Net Operating Income

The income generated from normal business operations after subtracting operating expenses but before interest and taxes.

Spending Variance

The discrepancy between the budgeted or planned amount of expense and the actual amount spent, often analyzed to understand financial performance.

Materials

The raw goods and components used in the manufacturing or production process to create final products.