If a Person Earns an 8 Percent Nominal Rate of Interest

question 26

Multiple Choice

If a person earns an 8 percent nominal rate of interest on his savings account in a year when inflation is 9 percent, the person's real rate of interest is

• A) −1 percent.
• B) 1 percent.
• C) 8 percent.
• D) 9 percent.

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Definitions:

Tort

A civil wrong that causes someone else to suffer loss or harm, resulting in legal liability for the person who commits the act.

Compensation

Payment or reward given for services rendered or harm suffered.

Tort Action

A legal proceeding arising from a wrongful act, leading to civil liability, rather than stemming from a contract dispute or criminal case.

Compensation

Payment or reward given for services rendered or damages incurred.