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:

Innovation

The process of introducing new ideas, devices, or methods, often leading to technological progress or improved solutions.

Invention

The creation of a new product, service, or process, often one that has never been made before, resulting from study and experimentation.

Diffusion

Diffusion in social sciences refers to the process by which an innovation is communicated through certain channels over time among the members of a social system.

Entrepreneurs

Individuals who create, organize, and manage a business venture, taking on financial risk to do so.