If the Short-Term Nominal Interest Rate Is 3

question 94

Multiple Choice

If the short-term nominal interest rate is 3.4%,the term structure effect is 1.2%,the default-risk premium is 1.4%,and the expected rate of inflation is 2.7%,the long-term real interest rate will be

• A) -1.9%.
• B) 0.5%.
• C) 3.3%.
• D) 8.7%.

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Definitions:

Ice Cream

A sweetened frozen food typically eaten as a snack or dessert, made from dairy products or other ingredients and flavors.

Marginal Utility

The extra satisfaction or usefulness gained from consuming or acquiring one more unit of a product or service.

Ties

Articles of clothing, typically narrow strips of fabric worn around the neck under the collar, primarily by men for decorative purposes.

Shirts

Pieces of clothing for the upper body, typically with sleeves and a front opening, made for both genders.