Suppose the Nominal Interest Rate Is 10

question 99

Multiple Choice

Suppose the nominal interest rate is 10%.The rate of inflation has been 4% and is expected to continue at 4% in the future.The real interest rate,which determines the firm's decision to purchase capital,is therefore

• A)4%.
• B)6%.
• C)10%.
• D)14%.
• E)indeterminate.

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