Pursuant to the Fisher Effect, the Nominal Rate of Interest

question 68

Multiple Choice

Pursuant to the Fisher effect, the nominal rate of interest is 5.00%, the inflation rate is 2.00% and the real rate of interest is [blank].

• A)5%, same as the nominal rate
• B)2.94%
• C)3.00%
• D)7.00%

---

Definitions:

Fixed Component

In cost accounting, this refers to costs that do not change with the level of production or sales, such as rent and salaries.

Variable Overhead Efficiency

Variable overhead efficiency refers to the effectiveness with which a company manages its variable manufacturing overhead costs in relation to its production activities.

Rate Variance

The difference between the expected or standard cost and the actual cost incurred for a particular expense, often analyzed in budgeting and cost management.

Budget Variance

The difference between the budgeted or planned amount of expense or revenue and the actual amount incurred or received.