The Nominal Interest Rate Is 5 Percent and the Real

question 371

Multiple Choice

The nominal interest rate is 5 percent and the real interest rate is 2 percent. What is the inflation rate?

• A)10 percent
• B)7 percent
• C)3 percent
• D)2.5 percent

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Definitions:

Plant Asset

Long-term tangible assets used in the production and operation of a company, excluding inventory.

FASB

The Financial Accounting Standards Board, an independent organization responsible for establishing accounting and financial reporting standards in the United States.

Depreciation Method

A systematic approach used to allocate the cost of a tangible asset over its useful life.

Units-Of-Production Depreciation

A depreciation method where the expense is based on actual usage or production levels, rather than time.