If the Nominal Interest Rate Is Higher Than the Real

question 97

Multiple Choice

If the nominal interest rate is higher than the real interest rate, then inflation must be:

• A) zero.
• B) higher than the nominal rate of interest.
• C) positive.
• D) negative.

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Definitions:

Market Price

The cost at which a product or service is made available in the market, dictated by the forces of supply and demand.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, indicating the profit beyond the normal return on investment.

Marginal Decision Rule

A principle stating that an action should be taken if, and only if, the marginal benefits are greater than or equal to the marginal costs.

MR

Short for Marginal Revenue, it refers to the extra revenue that an organization receives from selling one more unit of a good or service.