If the nominal interest rate is 5% and the inflation rate is 3%, the real interest rate is:
8%
2%
3%
5%
Correct Answer :
B. 2%
Related Questions
The term tax multiplier refers to:
The change in output resulting from a change in government spending
The change in output resulting from a change in taxes
The change in consumption resulting from a change in disposable income
The change in investment resulting from a change in interest rates
The term balance of payments refers to:
A record of all economic transactions between residents of a country and the rest of the world in a given period
The difference between government revenues and expenditures in a given period
The difference between exports and imports of goods and services in a given period
The total amount of money in circulation in a country
The term balance of trade refers to:
The difference between a country's exports and imports of goods and services
The difference between government revenues and expenditures
The difference between a country's savings and investments
The difference between the government budget deficit and surplus
The term monetary base refers to:
The total amount of money in circulation in an economy
The total amount of money held by banks as reserves
The total amount of money held by households and businesses
The total amount of money created by the central bank
The term marginal propensity to consume (MPC) refers to:
The change in consumption resulting from a change in disposable income
The total amount of consumption in an economy
The change in investment resulting from a change in interest rates
The total amount of saving in an economy
The term monetary policy refers to:
Central bank policies related to interest rates and money supply to influence the economy
Government policies related to taxation and spending to influence the economy
Policies aimed at regulating international trade
Policies related to the regulation of financial markets
The term fractional reserve banking refers to:
A system in which banks are required to hold a fraction of their deposits in reserves
A system in which banks are required to hold all of their deposits in reserves
A system in which banks are not required to hold any reserves
A system in which banks are required to hold more than their deposits in reserves
The natural rate of unemployment is:
The level of unemployment that occurs when the economy is at full employment
The level of unemployment that occurs when the economy is in a recession
The level of unemployment that occurs when there is no frictional or structural unemployment
The level of unemployment that occurs when there is no cyclical unemployment
Which of the following is an example of a regressive tax?
Sales tax
Progressive income tax
Property tax
Corporate income tax
The term open market operations refer to:
The buying and selling of government securities by the central bank to influence the money supply
The buying and selling of goods and services in international markets
The buying and selling of stocks in the stock market
The buying and selling of consumer goods in a free market economy
The Federal Reserve's main tool for controlling the money supply is:
Open market operations
Reserve requirements
Discount rates
Government spending
The term hyperinflation refers to:
An extremely high and rapidly increasing inflation rate
A moderate and stable inflation rate
A period of deflation in the economy
A period of steady economic growth
The term budget constraint refers to:
The limit on the total amount of money a consumer can spend
The limit on the total amount of money a government can borrow
The limit on the total amount of money a firm can invest
The limit on the total amount of money a central bank can print
The term automatic stabilizers refers to:
Government policies that automatically adjust to stabilize the economy during economic fluctuations
The tools used by the central bank to stabilize the money supply
The policies implemented by the government to control inflation
The policies implemented by the government to control unemployment
The Phillips curve depicts the relationship between:
Inflation and unemployment
Government spending and taxes
Savings and investment
Consumption and income
The term deadweight loss refers to:
The loss of economic efficiency that occurs when a market is not in equilibrium
The loss of consumer surplus that occurs when prices increase
The loss of producer surplus that occurs when prices decrease
The loss of government revenue due to taxes
Which of the following is an example of fiscal policy?
The Federal Reserve adjusting interest rates
The government increasing spending on infrastructure projects
The government selling bonds to the public
The central bank conducting open market operations
The term liquidity refers to:
The ease with which an asset can be converted into cash without loss of value
The total amount of money in circulation in an economy
The total amount of money held by households and businesses
The total amount of money held by banks as reserves
The aggregate demand curve shows the relationship between:
The price level and the quantity of real GDP demanded
The interest rate and investment spending
The price level and the quantity of money demanded
The exchange rate and net exports
The term tax incidence refers to:
The way in which the burden of a tax is shared between buyers and sellers in a market
The total amount of revenue collected by the government from taxes
The impact of a tax on the overall level of prices in an economy
The distribution of income among different households in an economy
The term money multiplier refers to:
The ratio of the change in the money supply to the change in the monetary base
The ratio of government spending to the level of GDP
The ratio of taxes to disposable income
The ratio of investment to savings in an economy
The term money market refers to:
The market for financial assets with maturities of one year or less
The market where foreign exchange rates are determined
The market for long-term government bonds
The market for commodities like gold and silver
The term complementary input refers to inputs that are:
Used together in the production process
Used interchangeably in the production process
Completely unrelated in the production process
Unrelated to the production process
If the nominal interest rate is 5% and the inflation rate is 3%, the real interest rate is:
8%
2%
3%
5%
The term long-run Phillips curve suggests that there is a trade-off between:
Inflation and unemployment in the long run
Inflation and output in the short run
Government spending and taxes
Monetary policy and fiscal policy
The term supply-side economics focuses on:
Policies that aim to increase aggregate demand in the economy
Policies that aim to increase the productive capacity of the economy
Policies that aim to control inflation through monetary policy
Policies that aim to control inflation through fiscal policy
The term regressive tax refers to a tax:
That takes a larger percentage of income from low-income individuals than from high-income individuals
That takes a larger percentage of income from high-income individuals than from low-income individuals
That is the same for all individuals regardless of income level
That is only imposed on corporations
Which of the following is a measure of income inequality?
Gini coefficient
Consumer Price Index (CPI)
Producer Price Index (PPI)
Lorenz curve
The term marginal propensity to consume (MPC) is defined as:
The change in consumption resulting from a change in disposable income
The total amount of consumption in an economy
The change in investment resulting from a change in interest rates
The change in saving resulting from a change in disposable income
The term government budget surplus occurs when:
Government revenues exceed government expenditures in a given period
Government expenditures exceed government revenues in a given period
Government revenues and expenditures are equal in a given period
Taxes are too high