If the Nominal Interest Rate Is 7 Percent and the Inflation

question 105

Multiple Choice

If the nominal interest rate is 7 percent and the inflation rate is 4 percent,what is the real interest rate?

• A) 2 percent
• B) 3 percent
• C) 5 percent
• D) 7 percent

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Definitions:

Economic Growth

Growth in the inflation-corrected value of goods and services that an economy outputs over time.

Social Security

The U.S. social insurance program financed by a federal payroll tax that provides disability, retirement, and death benefits.

National Debt

The total amount of money that a country's government has borrowed, by various means, to finance its spending that exceeds tax revenues.

Deficit

An economic condition when a government's expenditures exceed its revenues, leading to borrowing or spending reserves.