Suppose the Nominal Interest Rate on a Savings Bond Is

question 206

Multiple Choice

Suppose the nominal interest rate on a savings bond is 7 percent a year and the inflation rate is 4.5 percent a year.How much is the real interest rate?

• A) 1.56 percent
• B) 11.5 percent
• C) 2.5 percent
• D) 7 percent
• E) 4.5 percent

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Definitions:

Unit of X

A standard measure or quantity of something, used as a means of expressing or describing the amount.

Increase in Price

A situation where the cost of goods or services rises, affecting the supply and demand equilibrium.

Decrease in Price

A reduction in the amount of money required to purchase a good or service.

Price of X

Represents the amount of money required to purchase a specific quantity of product X.