The Nominal Interest Rate Is 7% and the Real Interest

question 60

Multiple Choice

The nominal interest rate is 7% and the real interest rate is 2.75%.What is the inflation rate?

• A) 3.75%
• B) 4.55%
• C) 4.25%
• D) 9.75%

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Definitions:

Monetarist Economists

Economists who believe that variations in the money supply have major influences on national output in the short run and the price level over longer periods.

Phillips Curve

Curve showing inverse relationship between the unemployment rate and the rate of inflation.

Laffer Curve

Shows that at very high tax rates, very few people will work and pay taxes; therefore government revenue will rise as tax rates are lowered.

General Price Level

indicates the average of the current prices of all goods and services in the economy at a specific time.