If a Bank Posts a Nominal Interest Rate of 11

question 6

Multiple Choice

If a bank posts a nominal interest rate of 11 percent, and inflation is expected to be 4 percent, then

• A)the expected real interest rate is 11 percent.
• B)the expected real interest rate is 7 percent.
• C)the expected real interest rate is 4 percent.
• D)the expected real interest rate is 15 percent.

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Definitions:

Fossil Fuels

Fossil fuels are natural fuels such as coal, oil, and natural gas derived from the remains of living organisms that have been transformed over millions of years through heat and pressure.

Nonrenewable Energy Sources

Energy resources such as coal, oil, and natural gas that cannot be replenished in a short period of time and will eventually deplete.

Scarce Resources

Resources that are limited in availability and can be used in the production of goods and services.

Tradeoffs

The compromise or sacrifice of one thing in order to obtain another, often used in discussions of economic policy and individual choices.