If the Bank Posts a Nominal Interest Rate of 7

question 13

Multiple Choice

If the bank posts a nominal interest rate of 7 per cent per year and the inflation rate is 4 per cent per year, then the real interest rate is:

• A) -3 per cent
• B) 3 per cent
• C) 4 per cent
• D) 11 per cent

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Definitions:

Z-statistic

A type of standard score that indicates how many standard deviations an element is from the mean of its distribution.

Z-test

A statistical test used to determine whether there is a significant difference between the mean of a sample and the population mean, assuming the distribution is normal.

µ = 22

Represents a population mean of 22 in statistical notation.

Null Hypothesis

A hypothesis that there is no effect or no difference, and it is the statement that researchers aim to test against.