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Assume That the Nominal Rate of Interest Is 10% and the Inflation

question 24

Multiple Choice

Assume that the nominal rate of interest is 10% and the inflation rate is 10%.The tax rate on interest from savings is 25%; in the first period Wes has $100 in savings.Which of the following statements is TRUE?


Definitions:

Drive-Reduction

A motivational theory suggesting that behavior is an attempt to reduce drives caused by needs or stress, restoring a state of balance.

Instinct

A natural and usually unchangeable behavior pattern in animals triggered by specific signals.

Cognitive

Relating to, being, or involving conscious intellectual activity such as thinking, reasoning, or remembering.

Primary Motives

Fundamental drives or instincts that are necessary for survival, such as hunger, thirst, and the need for warmth.

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