Suppose That You Own a House

question 82

Multiple Choice

Suppose that you own a house.What is the opportunity cost of living in the house?

• A) There is no opportunity cost because you own the house.
• B) There is no opportunity cost unless you could set up a business in the house.
• C) The opportunity cost is the rent you could have received from a tenant if you did not live there.
• D) The opportunity cost is the cost of your monthly mortgage payment plus bills.

---

Definitions:

Nominal Interest Rate

The interest rate before adjustment for inflation, representing the face value of financial transactions.

Real Interest Rate

The interest rate that accounts for inflation, reflecting the actual cost of borrowing and the real return on savings.

Inflation Rate

The level of acceleration in the overall pricing of goods and services, resulting in a decline in buying efficiency.

Nominal Interest Rate

The rate of interest before adjusting for inflation, representing the face value of interest payments made on savings or loans.