If the Nominal Interest Rate Is 8% and the Real

question 111

Multiple Choice

If the nominal interest rate is 8% and the real interest rate is 3%, then the inflation rate equals:

• A)3%
• B)5%
• C)8%
• D)11%

---

Definitions:

Reality Principle

A psychoanalytic concept that represents the ability of the mind to assess the external world and act upon it realistically, as opposed to the pleasure principle.

Ego

In psychoanalytic theory, it represents the part of the mind that mediates between the conscious and the unconscious and is responsible for reality testing and a sense of personal identity.

Freud

Sigmund Freud, an Austrian neurologist and the founder of psychoanalysis, a clinical method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Ego

The Freudian construct representing the self, or the part of one's personality that is involved in decision making and reality testing.