The Real Rate of Interest Is 3 Percent and Inflation

question 72

Multiple Choice

The real rate of interest is 3 percent and inflation is 4 percent. What is the nominal rate of interest?

• A)3.00 percent
• B)1.00 percent
• C)7.12 percent
• D)-1.00 percent

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Definitions:

Internality

A personality trait that involves attributing success and failure to one's own efforts and abilities.

Externality

A term in economics that describes a cost or benefit that affects a party who did not choose to incur that cost or benefit.

Internality-Externality

A psychological dimension that distinguishes between individuals who attribute outcomes to their own control (internality) and those who attribute them to external forces (externality).

Locus of Control

Locus of control is a psychological concept that refers to individuals' belief about the extent to which the outcomes of their actions are under their own control (internal locus) or influenced by external factors (external locus).