Suppose the Nominal Interest Rate Is 10 Percent Annually, and You

question 1

Multiple Choice

Suppose the nominal interest rate is 10 percent annually, and you deposit $1,000. Inflation in the economy throughout the year is 6 percent. At the end of the year, you have earned:

• A) a real rate of return of 4 percent.
• B) an increase in your purchasing power.
• C) a nominal increase in your savings of $100.
• D) All of these statements are true.

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Definitions:

Face Cards

Cards in a deck that depict a face, specifically the Jack, Queen, and King of each suit.

Probability

A measure of the likelihood of a particular event occurring, expressed as a number between 0 and 1.

Cards

Refers to thin pieces of plastic or paper, typically rectangular in shape, used for playing games, storing information, or performing transactions.

Clothing Store

A retail establishment that specializes in selling garments and accessories to consumers.