The 'Real Rate' of Interest Is The

question 61

Multiple Choice

The 'real rate' of interest is the:

• A)nominal interest rate plus the expected inflation rate.
• B)nominal interest rate minus the expected inflation rate.
• C)interest rate determined by the supply and demand in the money market.
• D)nominal interest rate.

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Definitions:

Heuristics

The brain’s low-energy mental shortcuts for making decisions. They are “fast and frugal” and work well in most situations but in other situations result in systematic errors.

Behavioral Economics

An area of economic research that examines how psychological, cognitive, emotional, cultural, and social factors affect the economic decisions of individuals and institutions.

Neoclassical Economics

An approach to economics focusing on the determination of goods, outputs, and income distributions in markets through supply and demand.

Behavioral Economics

A field of economics that studies how psychological, cognitive, emotional, cultural, and social factors affect economic decisions.