The Real Interest Rate Is 8 Percent and the Nominal

question 334

Multiple Choice

The real interest rate is 8 percent and the nominal interest rate is 10.5 percent. Is there inflation or deflation? What is the inflation or deflation rate?

• A)deflation; 2.5 percent
• B)deflation; 20.5 percent
• C)inflation; 2.5 percent
• D)inflation; 20.5 percent

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Definitions:

Receivables

All money claims against other entities, including people, business firms, and other organizations.

Current Liabilities

Short-term financial obligations a company owes and is expected to pay within a year, such as accounts payable and short-term loans.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year.

Bondholders

Individuals or entities that hold the debt securities issued by corporations or governments, entitled to receive interest payments and the return of principal.