Which of the Following Statements About Real and Nominal Interest

question 18

Multiple Choice

Which of the following statements about real and nominal interest rates is correct?

• A)When the nominal interest rate is rising,the real interest rate is necessarily rising;when the nominal interest rate is falling,the real interest rate is necessarily falling.
• B)If the nominal interest rate is 4 percent and the inflation rate is 3 percent,then the real interest rate is 7 percent.
• C)An increase in the real interest rate is necessarily accompanied by either an increase in the nominal interest rate,an increase in the inflation rate,or both.
• D)When the inflation rate is positive,the nominal interest rate is necessarily greater than the real interest rate.

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Definitions:

Marginal Utility

The change in satisfaction or utility that a person receives from consuming an additional unit of a good or service.

Utility-Maximizing

The concept in economics and consumer theory where individuals or firms make decisions that lead to the highest level of satisfaction or benefit within their constraints.

Total Utility

The cumulative satisfaction or usefulness that a person gains from consuming all units of a particular good or service.

Marginal Utility

The supplementary enjoyment or value obtained by consuming an extra unit of a good or service.