If Inflation Is Anticipated to Be 5 Per Cent During

question 43

Multiple Choice

If inflation is anticipated to be 5 per cent during the next year, while the real rate of interest for a one-year loan is 5 per cent, then what should the nominal rate of interest be for a risk-free one-year loan?

• A) 5 per cent
• B) 10 per cent
• C) 25 per cent
• D) none of the above

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Definitions:

Habituation

A type of learning in which an animal becomes accustomed to a repeated, irrelevant stimulus and no longer responds to it.

Physiologically Ready

A state in which an organism or part of an organism is prepared for a specific physiological process or activity.

Sand Wasp

Insect species within the Crabronidae family, known for nesting in sandy environments and often preying upon or parasitizing other insects.

Sign Stimulus

A specific external sensory cue that triggers a fixed action pattern in an animal.