The Nominal Interest Rate Contains Two Components

question 31

Multiple Choice

The nominal interest rate contains two components:

• A)the real interest rate and the exchange rate.
• B)the real interest rate and the inflation rate.
• C)the inflation rate and a risk factor.
• D)the real interest rate and a risk factor.

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Definitions:

Marginal Cost

is the cost incurred by producing one additional unit of a product or service.

Profits

The financial gain made in a transaction or operation, calculated as the difference between revenue and expenses.

Firm

A business organization, such as a corporation or partnership, that sells goods or services in exchange for revenue.

Profit-Maximizing Firm's Output

The output level at which a firm achieves the maximum possible profit, typically where marginal cost equals marginal revenue.