If a Bank Posts a Nominal Interest Rate of 4

question 80

Multiple Choice

If a bank posts a nominal interest rate of 4 percent,and inflation is expected to be 3 percent,then

• A)the expected real interest rate is 7 percent.
• B)the expected real interest rate is 1 percent.
• C)the expected real interest rate is 1.33 percent.
• D)the expected real interest rate is 12 percent.

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Definitions:

Fallacy of Affirming the Consequent

A logical fallacy that occurs when, from an if-then statement, one incorrectly infers the if-part solely from the then-part.

Affirming the Consequent

A logical fallacy in which a conclusion is incorrectly derived from a conditional statement (if A, then B; B, therefore A).

Straw Man Fallacy

A logical fallacy that involves misrepresenting an argument to make it easier to attack.

Appeal to Emotion

A logical fallacy where an argument is made by manipulating the emotions of the audience rather than by using valid reasoning.