If the Inflation Rate Is Larger Than the Nominal Interest

question 89

Multiple Choice

If the inflation rate is larger than the nominal interest rate:

• A) unemployment rises.
• B) the real interest rate is zero.
• C) the real interest rate is negative.
• D) the real interest rate is larger than the nominal interest rate.
• E) Not enough information is given.

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Definitions:

Effective

Producing a decided, decisive, or desired effect, often measuring the degree of success or efficiency of an action or item.

Car Salesman

A professional who sells new or used cars at a dealership and typically works on commission, aiming to meet or exceed sales quotas.

Dealer

An individual or company involved in the buying and selling of goods or securities in their own account.

Moral Hazard

The risk that one party to a contract will engage in behaviors that are undesirable to the other party, due to asymmetrical information or guaranteed protections.