When the Expected Inflation Rate Is Zero, Then It Follows

question 36

Multiple Choice

When the expected inflation rate is zero, then it follows that the

• A)real interest rate is greater than the nominal interest rate.
• B)demand for loanable funds is equal to the supply of loanable funds.
• C)demand for loanable funds is greater than the supply of loanable funds.
• D)real interest rate is less than the nominal interest rate.
• E)real interest rate is equal to the nominal interest rate.

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Definitions:

Financial Break-Even

The point at which total revenues equal total expenses, leading to a net income of zero.

Initial Investment

The amount of money used to start a project, investment, or venture.

Depreciation

The reduction in value of an asset over time, often due to wear and tear or obsolescence.

Accounting Break-Even

The point at which an organization's revenues exactly cover its expenses, excluding interest and taxes, resulting in neither profit nor loss.