Comparing the Situation of a Nominal Interest Rate of 10

question 97

Multiple Choice

Comparing the situation of a nominal interest rate of 10 percent and an inflation rate of 9 percent with a nominal interest rate of 6 percent and inflation rate of 2 percent,consumers would borrow more in which situation?

• A)Nominal interest rate of 10 percent since real interest rate is 1 percent.
• B)Nominal interest rate of 6 percent since the real interest rate is 4 percent.
• C)Nominal interest rate of 10 percent since the real interest rate is 9 percent.
• D)Nominal interest rate of 6 percent since the real interest rate is 2 percent.

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Definitions:

Transactional Leadership

A leadership style focused on supervision, organization, and performance; characterized by a system of rewards and punishments.

Contingent Rewards

Rewards that are given based on the achievement of specific criteria or performance benchmarks.

Active Management

An investment strategy where the manager makes specific investments with the goal of outperforming an investment benchmark index.

Passive Management

An investment strategy that involves minimal buying or selling actions, aiming to replicate the performance of a specific index or benchmark.