Let: (1)Pt Be the Price of One Unit of a Market

question 63

Multiple Choice

Let: (1) Pt be the price of one unit of a market basket of goods it be the one-year nominal interest rate.Suppose an individual borrows the equivalent of one unit of a composite commodity today.Given this information,which of the following expressions represents (i.e.,is equal to) the real interest rate (rt) ?

• A) (1 + it) (Pet+1) / (Pt)
• B) (1 + πet+1) / (1 + it)
• C){(1 + πet+1) / (1 + it)} - 1
• D){(1 + it) (Pt) / (Pet+1)} - 1
• E)none of the above

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Definitions:

Voluntary

Referring to actions or activities that are done willingly, without any coercion or obligation.

Skinner Box

An experimental apparatus developed by B.F. Skinner for studying behavioral conditioning in animals, particularly through reinforcements and punishments.

Operant

Any behavior that is voluntary and not elicited by specific stimuli.

Biological Preparedness

The concept that organisms are innately predisposed to form associations between certain stimuli and responses, facilitating learning.