If the Real Interest Rate Is 5 Percent and the Inflation

question 28

True/False

If the real interest rate is 5 percent and the inflation rate is 2 percent, then the nominal interest rate is 7 percent.

---

Definitions:

Paired-Choice Majority Voting

A decision-making process in which choices are presented in pairs and voted on, with the majority preference determining the winner in each pair.

Special-Interest Effect

The impact of interest groups on politics and policy making, where small groups achieve benefits at the expense of the larger population.

Median-Voter Model

A theoretical framework suggesting that the outcome of majority-rule voting systems will reflect the preferences of the median voter.

Political Logrolling

A practice where politicians exchange favors by supporting each other’s proposed legislations or policies.