What Is the Real Interest Rate If the Nominal Interest

question 173

Multiple Choice

What is the real interest rate if the nominal interest rate is 7 percent and the expected inflation rate is 3 percent?

• A) 0 percent
• B) 4 percent
• C) -4 percent
• D) 10 percent
• E) -3 percent

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Definitions:

Structural Unemployment

A form of unemployment that arises from a mismatch between the skills that workers offer and the skills demanded by employers, often due to technological changes or market shifts.

Frictional Unemployment

Unemployment that occurs when people are between jobs or are entering the labor force for the first time.

Cyclical Unemployment

A type of unemployment that relates to the cyclical trends in the business cycle, increasing during recessions and decreasing in expansions.

Unemployment Spells

Periods of time during which an individual is searching for employment but is unable to find work.