If the Real Interest Rate Is 5%, the Rate of Inflation

question 48

Multiple Choice

If the real interest rate is 5%, the rate of inflation in the United States is 6%, and the rate of inflation in the United Kingdom is 3%, which of the following statements would NOT be true?

• A)The nominal rate of interest in the United States would be greater than the nominal interest rate in the United Kingdom.
• B)The difference between the U.K. and U.S. interest rates is a function of the difference between their inflation rates.
• C)The nominal rate of interest in the United States and the United Kingdom would be the same because of purchasing power parity.
• D)Investors would get a higher return on their money in the United States.

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Definitions:

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A region of the brain within the temporal lobe, involved in experiencing emotions, particularly fear and pleasure.