Alex Expects the Inflation Rate to Be 4

question 132

Multiple Choice

Alex expects the inflation rate to be 4%. If Alex borrows money at a nominal interest rate of 5%, his real interest rate is:

• A)greater than the nominal interest rate.
• B)less than the nominal interest rate.
• C)equal to the nominal interest rate.
• D)negative.

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Definitions:

MC

Marginal Cost; the change in total production cost that arises when the quantity produced is incremented by one unit.

Marginal Cost

The cost of producing one additional unit of a product or service, an important concept in economics for decision-making regarding production levels.

Total Variable Costs

The sum of all costs that vary with the level of output, including materials, labor, and other expenses that increase or decrease as production changes.

Natural Monopoly

A market condition where due to high fixed costs or unique resources, a single company can supply a product or service at a lower cost than any potential competitor, thus dominating the market.