You Borrow $10,000 from a Bank for One Year at a Nominal

question 184

Multiple Choice

You borrow $10,000 from a bank for one year at a nominal interest rate of 5%.The CPI over that year rises from 180 to 200.What is the real interest rate you are paying?

• A)15%
• B)5%
• C)-1.1%
• D)-6.1%
• E)-8.1%

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Definitions:

Profit Earn

The income a business receives after all expenses and costs are subtracted from total revenue.

Price Discrimination

The practice of charging different prices for the same product or service to different consumers, based on their willingness to pay.

Pure Monopoly

refers to a market structure where a single company or entity has exclusive control over a particular good or service, eliminating direct competition.

Economic Profit

The difference between the total revenue generated by a business and the total costs, including both explicit and opportunity costs.