If the Rate of Inflation Is 2 Percent, the Output

question 63

Multiple Choice

If the rate of inflation is 2 percent, the output gap is 0 percent, the nominal interest rate is 3 percent, and the unemployment rate is 10 percent, what is the real interest rate?

• A) 1 percent
• B) 2 percent
• C) -7 percent
• D) -1 percent
• E) 3 percent

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Definitions:

Operating Expenses

Operating expenses are the costs associated with running a business’s core activities on a day-to-day basis, excluding the cost of goods sold.

Sales Revenue

The total amount earned by a company from its sales of goods or services, before any deductions for returned goods and allowances.

Gross Profit Rate

A financial ratio that compares gross profit to net sales, indicating the efficiency of production and pricing.

Operating Expenses

Expenses incurred from normal business operations such as manufacturing costs, marketing fees, and office supplies.