Which of the Following Combinations of Real Interest Rates and Inflation

question 52

Multiple Choice

Which of the following combinations of real interest rates and inflation implies a nominal interest rate of 7 percent?

• A)a real interest rate of 2.5 percent and an inflation rate of 2 percent
• B)a real interest rate of 4 percent and an inflation rate of 11 percent
• C)a real interest rate of 6 percent and an inflation rate of 1 percent
• D)a real interest rate of 5.5 percent and an inflation rate of 3 percent

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Definitions:

Accounting Transactions

Economic events that require recording in the financial statements because they affect the assets, liabilities, or equity of a company.

Accounting Records

Documentation and books that keep track of the financial transactions of a business or individual, forming the basis for its financial statements.

Asset

Resources controlled by a business from which future economic benefits are expected to flow to the business, including both physical items and intangible properties.