The Market Interest Rate in Alpha Is 7% and the Market

question 125

Multiple Choice

The market interest rate in Alpha is 7% and the market interest rate in Beta is 10%,but the inflation rate in Alpha is 5% and inflation rate in Beta is 6%.Which of the following statements is true?

• A) The real interest rate is higher in Alpha,but the nominal interest rate is higher in Beta.
• B) The real interest rate is lower in Alpha,but the nominal interest rate is lower in Beta.
• C) Both the real and nominal interest rates are higher in Alpha.
• D) Both the real and nominal interest rates are higher in Beta.
• E) The real and nominal interest rates are the same in Alpha and Beta.

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