If the Real Interest Rate Is Equal to the Nominal

question 4

Multiple Choice

If the real interest rate is equal to the nominal interest rate in an economy,________.

• A) the inflation rate must be zero in the economy
• B) the inflation rate must be positive in the economy
• C) the inflation rate must be negative in the economy
• D) the nominal interest rate must be zero in the economy

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Definitions:

Discount Period

It refers to the time frame in which a discount is available for early payment under the credit terms of a transaction.

Credit Period

The time frame allowed by a creditor for a debtor to pay an outstanding bill or loan without incurring penalties or interest.

Cash Discount

An incentive offered by sellers to purchasers for paying an invoice promptly, usually defined as a percentage reduction in the invoice amount.

EOQ Model

Economic Order Quantity model; an inventory management method used to determine the optimum order quantity that minimizes the total inventory holding costs and ordering costs.