Suppose the Nominal Interest Rate Is 4 Percent Annually, and You

question 80

Multiple Choice

Suppose the nominal interest rate is 4 percent annually, and you deposit $1,000. Inflation in the economy throughout the year is 5 percent. At the end of the year, you have earned:

• A) a real rate of return of 1 percent.
• B) an increase in your purchasing power.
• C) a nominal increase in your savings of $40.
• D) All of these statements are true.

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Definitions:

Response Threshold

It is the minimal amount of stimulus intensity required for a neuron to fire a response or for a specific response criterion to be met in behavior.

Psychophysics

The scientific study of the relationship between stimuli (which are physical) and the sensations and perceptions they produce in the observer.

Physical Energy

The capacity to perform work or to produce physical changes within the body or environment, stemming from physical or chemical resources.

Sensory Physiology

The study of how organisms perceive and respond to physical stimuli in their environment through sensory organs.