You Lend $5,000 to a Friend for One Year at a Nominal

question 258

Multiple Choice

You lend $5,000 to a friend for one year at a nominal interest rate of 10%.The CPI over that year rises from 180 to 190.What is the real rate of interest you will earn?

• A)0%
• B)4.4%
• C)5.5%
• D)5.8%

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Definitions:

Authorized Channels

Officially approved and recognized paths or mediums through which products or information are distributed, ensuring legitimacy and compliance with regulations.

Protectionism

A government policy aimed at restricting international trade to protect domestic industries from foreign competition.

Trade Feedback Effect

A phenomenon where an increase in exports leads to an increase in national income and thus an increase in imports.

Countertrade

An exchange of goods or services for other goods or services without using a medium of exchange, such as money.