If the Nominal Interest Rate Is 7 Percent and the Rate

question 168

Multiple Choice

If the nominal interest rate is 7 percent and the rate of inflation is 3 percent,then the real interest rate is

• A)7 percent.
• B)4 percent.
• C)3 percent.
• D)10 percent.

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Definitions:

Efficiency Loss

The loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable.

Marginal Tax Rate

The tax rate paid on an additional dollar of income.

State And Local Taxes

Taxes imposed by individual states and local governments in the U.S. on income, property, sales, and other activities to fund public services.

Predominantly Regressive

Describing a situation or policy where the burden disproportionately affects those with lower incomes, making it effectively regressive in impact.