If You Expect the Inflation Rate to Be 5 Percent

question 93

Multiple Choice

If you expect the inflation rate to be 5 percent next year and a one-year bond has a yield to maturity of 7 percent,then the real interest rate on this bond is

• A) -12 percent.
• B) -2 percent.
• C) 2 percent.
• D) 12 percent.

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Definitions:

Behaviour Modification

The use of empirically demonstrated behavior change techniques to improve behavior, such as altering an individual's behaviors and reactions to stimuli through positive and negative reinforcement.

Reinforcement

In psychology, a concept where a behavior is encouraged or strengthened by a consequence that follows it.

Modelling

The process of demonstrating a particular behavior or skill that others are expected to learn or emulate.

Mimicking

The act of imitating or copying the behavior, actions, or traits of others, often as a learning method or strategy for adaptation.