If the Real Interest Rate Is 8 Per Cent and the Inflation

question 15

Multiple Choice

If the real interest rate is 8 per cent and the inflation rate is 2.5 per cent,then the nominal interest rate is

• A)2.5 per cent.
• B)10.5 per cent.
• C)8 per cent.
• D)5.5 per cent.
• E)3.2 per cent.

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Definitions:

Conditioned Response

An automatic response established by training to an ordinarily neutral stimulus.

Unconditioned Stimulus

A stimulus that naturally triggers a response without any conditioning or learning process.

Unconditioned Response

An automatic, unlearned reaction to a stimulus, such as salivating when smelling food.

Unconditioned Stimulus

A stimulus that naturally and automatically triggers a response without the need for prior learning.