The Nominal Interest Rate Is 5% and the Inflation Rate

question 54

Multiple Choice

The nominal interest rate is 5% and the inflation rate is 6%.A rational consumer

• A)will not save since the real interest rate is negative.
• B)will save less than 1% of her income.
• C)will save the same amount regardless of the inflation rate; only the nominal interest rate matters.
• D)might save despite the negative real interest rate.
• E)will necessarily save less if the inflation rate rises and the nominal interest rate does not change.

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Definitions:

National Union

A labor union that represents the interests of workers across an entire nation, across various industries or sectors.

Social Union

A type of union or group that focuses primarily on social activities, support, and engagement among its members, rather than on economic or political goals.

Craft Union

A type of union composed of workers who possess the same skills or trades.

Industrial Union

A type of union that includes the unskilled and semiskilled workers at a particular location.