If the Expected Real Interest Rate 5% and Expected Inflation

question 30

Multiple Choice

If the expected real interest rate 5% and expected inflation 3%,the nominal interest rate in year t is approximately

• A)2%.
• B)3%.
• C)5%.
• D)8%.
• E) 11%.

---

Definitions:

Progressive Tax

At the individual level, a tax whose average tax rate increases as the taxpayer’s income increases. At the national level, a tax for which the average tax rate (= tax revenue/GDP) rises with GDP.

Exhaustive Governmental Outlay

Total government spending on goods and services that are directly consumed or invested, excluding transfer payments such as subsidies or social security benefits.

Subsidy Check

A government grant paid to individuals, businesses, or other entities as financial support to encourage or maintain economic activities deemed beneficial.

Temporary Assistance

Financial aid provided on a short-term basis to individuals or families in need, often aimed at supporting basic needs like food, shelter, and healthcare.