The Nominal Interest Rate Is 5% and the Inflation Rate

question 54

Multiple Choice

The nominal interest rate is 5% and the inflation rate is 6%.A rational consumer

• A)will not save since the real interest rate is negative.
• B)will save less than 1% of her income.
• C)will save the same amount regardless of the inflation rate; only the nominal interest rate matters.
• D)might save despite the negative real interest rate.
• E)will necessarily save less if the inflation rate rises and the nominal interest rate does not change.

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Definitions:

Net Exports

The value of a country's total exports minus the value of its total imports, indicating the balance of trade.

National Debt

The total amount of money that a country’s government has borrowed by issuing securities and not yet repaid.

Export

Goods or services produced in one country and sold to customers in other countries.