If You Take Out a Mortgage with a Nominal Interest

question 29

Multiple Choice

If you take out a mortgage with a nominal interest rate of 8% and you expect the inflation rate to be 2%,but the actual inflation rate turns out to be 8%,then you end up paying a real interest rate of

• A) 0%.
• B) 1%.
• C) 2%.
• D) 6%.

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Definitions:

Behaviorism

Theoretical approach that seeks to explain behavior in terms of learning principles, without reference to inner states, thoughts, or feelings

Learning Principles

Fundamental guidelines or rules that describe how people acquire new knowledge, skills, attitudes, or behaviors.

Human Behavior

The entirety of actions, reactions, and interactions undertaken by humans, influenced by culture, attitudes, emotions, values, ethics, and the external environment.

Social Psychology

The scientific study of how people affect and are affected by others.