Suppose That Over the Past Year,the Real Interest Rate Was

question 57

Multiple Choice

Suppose that over the past year,the real interest rate was 3 percent and the inflation rate was 1 percent.It follows that

• A)the dollar value of savings increased at 2 percent,and the purchasing power of savings increased at 3 percent.
• B)the dollar value of savings increased at 2 percent,and the purchasing power of savings increased at 4 percent.
• C)the dollar value of savings increased at 4 percent,and the purchasing power of savings increased at 2 percent.
• D)the dollar value of savings increased at 4 percent,and the purchasing power of savings increased at 3 percent.

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Definitions:

Equipment Lease

A contractual agreement where the owner of equipment allows another party to use the equipment for a specified period in exchange for payment.

Lease Rate

The cost of leasing a tangible or intangible asset, often expressed as a payment amount per period.

Implicit Rate

The interest rate implied by the lease payments in a leasing agreement, used in lease accounting to calculate the present value of lease payments.

Non-Cancelable Lease

A lease agreement that cannot be terminated before its expiration date by either the lessee or the lessor without incurring penalties.