If a Country Had Deflation, How Would the Nominal Interest

question 90

Multiple Choice

If a country had deflation, how would the nominal interest rate compare to the real interest rate?

• A)The nominal interest rate would be greater than the real interest rate.
• B)The real interest rate would be greater than the nominal interest rate.
• C)The real interest rate would equal the nominal interest rate.
• D)There is insufficient information to answer the question.

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Definitions:

Marginal Cost

The added cost of producing one additional unit of a product or service.

Labor Costs

The total amount of money businesses have to pay to their employees for work done, including wages, salaries, and benefits.

Marginal Cost

The increase in cost resulting from the production of an extra good or service unit.

Total Cost

The sum of all costs associated with the production of a given quantity of output, including both fixed and variable costs.