If the actual inflation rate is less than the anticipated inflation rate, then the real rate of interest
A) is negative.
B) is less than the nominal rate of interest.
C) equals the nominal rate of interest.
D) is more than the nominal rate of interest.
92) Debtors gain and creditors lose when
A) the anticipated rate of inflation is greater than the actual rate of inflation.
B) the anticipated rate of inflation is less than the actual rate of inflation.
C) the anticipated rate of inflation is the same as the unanticipated rate of inflation.
D) the unanticipated rate of inflation is zero.
93) The real rate of interest is
A) the nominal rate of interest minus the anticipated rate of inflation.
B) the current rate actually paid by the borrower.
C) the difference between the bank's lending and savings rates.
D) the current rate which the government pays on its debt.
94) Assume you borrow money to buy a new car at 10 percent interest, and you think that the economy-wide rate of inflation over the life of the loan will be 8 percent. If you are correct in your assumption, your real rate of interest on the car loan will be
A) 2 percent.
B) 8 percent.
C) 10 percent.
D) 18 percent.
95) Prices have been rising 6 percent a year for twenty years. The nominal rate of interest is 12 percent. The real rate of interest is
A) 4 percent.
B) 6 percent.
C) 10 percent.
D) 12 percent.
96) The inflation rate has been 4 percent for twenty years and the nominal interest rate has been 8 percent during this same time period. Unexpectedly, the actual inflation rate the next year is 8 percent. The real rate of interest this last year is
B) 2 percent.
C) 4 percent.
D) 6 percent.
97) If the rate of inflation is 4 percent and the real interest rate is 3 percent, the nominal interest rate should be
A) 1 percent.
B) 4 percent.
C) 7 percent.
D) 11 percent.
98) The real rate of interest is defined as
B) the nominal rate of interest.
C) the nominal rate of interest minus the anticipated inflation rate.
D) the nominal rate of interest plus the anticipated inflation rate.
99) Prices have been rising 8 percent a year for ten years. The nominal interest rate is 12 percent. The real rate of interest is
A) 20 percent.
B) 12 percent.
C) 8 percent.
D) 4 percent.
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