Which of the Following Statements About Real and Nominal Interest

question 18

Multiple Choice

Which of the following statements about real and nominal interest rates is correct?

• A)When the nominal interest rate is rising,the real interest rate is necessarily rising;when the nominal interest rate is falling,the real interest rate is necessarily falling.
• B)If the nominal interest rate is 4 percent and the inflation rate is 3 percent,then the real interest rate is 7 percent.
• C)An increase in the real interest rate is necessarily accompanied by either an increase in the nominal interest rate,an increase in the inflation rate,or both.
• D)When the inflation rate is positive,the nominal interest rate is necessarily greater than the real interest rate.

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Definitions:

Profit-Maximizing Price

The price level at which a firm can generate the maximum possible profit, considering the relationship between price, demand, and cost.

High School Yearbook

A publication compiled annually by students or staff, capturing memories, photographs, and articles related to the events and people of a specific school year.

Collusively

Involves cooperation among competing firms to control market prices or exclude new competitors, contrary to free market principles.

Economic Profits

The surplus remaining after subtracting total costs from total revenues, including both explicit and implicit costs.