Suppose the Nominal Annual Interest Rate on a Two Year

question 45

Multiple Choice

Suppose the nominal annual interest rate on a two year loan is 16 percent and lenders expect inflation to be 10 percent in each of the two years.The annual real rate of interest is:

• A)12 percent.
• B)16 percent.
• C)4 percent.
• D)6 percent.

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Definitions:

Individual Transferable Quotas (ITQs)

Limits (quotas) set by a government or a fisheries commission on the total number or total weight of a species that an individual fisher can harvest during some particular time period; fishers can sell (transfer) the right to use all or part of their respective individual quotas to other fishers.

Tragedy of the Commons

A situation in which individuals act according to their own self-interest regarding a shared resource, depleting or spoiling that resource through their collective action.

Economic Growth

An increase in the capacity of an economy to produce goods and services, compared from one period of time to another.

Low Birthrates

A situation in a population where the number of births is significantly lower than the global average or the replacement level.