If the Real Interest Rate Relevant to a Bank Account

question 164

Multiple Choice

If the real interest rate relevant to a bank account is 5 percent and the expected inflation rate is 4 percent,then after a year a person expects to have,relative to today,

• A)9 percent more dollars in the bank account, which will purchase 5 percent more goods.
• B)5 percent more dollars in the bank account, which will purchase 4 percent more goods.
• C)5 percent more dollars in the bank account, which will purchase 4 percent more goods
• D)4 percent more dollars in the bank account, which will purchase 1 percent more goods.

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Definitions:

S-R Association

The connection between a stimulus and the response it triggers, fundamental to behaviorist theories of learning and conditioning.

Learning Process

The acquisition of knowledge, skills, behaviors, or preferences, often as a result of study, experience, or teaching, which involves changes in the brain.

Cathexis

The idea that the ability of deprivation states to motivate behavior transfers to the stimuli present during the deprivation state.

Tolman

An American psychologist known for his work on latent learning and cognitive maps in rats and humans.