If the Rate of Inflation Is -2 Percent, the Output

question 54

Multiple Choice

If the rate of inflation is -2 percent, the output gap is -5 percent, the nominal interest rate is 5 percent, and the unemployment rate is 8 percent, what is the real interest rate?

• A) 10 percent
• B) 0 percent
• C) -3 percent
• D) 7 percent
• E) 3 percent

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Definitions:

Division of Labor

The separation of a work process into a number of tasks, with each task performed by a separate person or group, leading to increased efficiency.

Services

Economic activities that produce intangible goods or benefits, such as healthcare, education, banking, and entertainment, as opposed to tangible physical products.

The Wheel

A revolutionary invention enabling easier transportation and movement of goods, significantly impacting human civilization.

Years Ago

A phrase used to indicate a specific amount of time in the past relative to the present.