If the Realized Real Interest Rate in an Economy Is

question 139

Multiple Choice

If the realized real interest rate in an economy is 6 percent,the nominal interest rate is 8 percent,and the expected inflation rate is 8 percent,then the realized inflation rate in the economy is ________.

• A) 2 percent
• B) 4 percent
• C) 6 percent
• D) 8 percent

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Definitions:

Securities

Financial instruments representing ownership (stocks), a creditor relationship with a government or corporation (bonds), or other rights to ownership or profit.

Open Market

A marketplace that is open to all participants, where buyers and sellers engage in trade without significant restrictions or regulations.

Interest Rates

The percentage of a sum of money charged for its use, often expressed annually.

Excess Reserves

The amount of reserves that a bank holds beyond the required minimum set by the central bank or regulatory authority.