1. A rise in the amount of inflation, given a fixed nominal interest rate will c

Question

1. A rise in the amount of inflation, given a fixed nominal interest rate will cause:

a. The nominal interest rate to rise

b.  The nominal interest rate to fall

c. The real interest rate to rise

d. The real interest rate to fall

2. In which situation is the real interest rate highest?

a. The nominal interest rate is 25% and the inflation rate 30%.

b. The nominal interest rate is 2% and the inflation rate 1%.

c. The nominal interest rate is 8% and the inflation rate 5%.

d. The nominal interest rate is 11% and the inflation rate 9%.

3. Cost-push inflation originates from the demand side of the economy.

a. True

b. False

4. Unanticipated inflation penalises:

a. those earning incomes that are taxed in nominal terms

b. those who hold cash

c. those who lend money at a fixed interest rate

d. all of the above

5.

1. A rise in the amount of inflation, given a fixed nominal interest rate will cause:

a. The nominal interest rate to rise

b.  The nominal interest rate to fall

c. The real interest rate to rise

d. The real interest rate to fall

2. In which situation is the real interest rate highest?

a. The nominal interest rate is 25% and the inflation rate 30%.

b. The nominal interest rate is 2% and the inflation rate 1%.

c. The nominal interest rate is 8% and the inflation rate 5%.

d. The nominal interest rate is 11% and the inflation rate 9%.

3. Cost-push inflation originates from the demand side of the economy.

a. True

b. False

4. Unanticipated inflation penalises:

a. those earning incomes that are taxed in nominal terms

b. those who hold cash

c. those who lend money at a fixed interest rate

d. all of the above

5.

Explanation / Answer

1) Real interest rate is an interest rate where effect of inflation has been adjusted from the nominal interest rate.

Thus, real interest rate=nominal interest rate-inflation.

So if nominal interest rate is fixed and inflation rate rises then real interest rate will fall(d)

2) Real interest rate is highest when nominal interest rate=85 and inflation is 5%(c)

3) Cost push inflation occurs due to increase in prices of inputs like labour, capital etc.

This originates from the changes in aggregate supply so it does not originate from the demand side of the economy.-FALSE(b)

4) Unanticipated inflation is the inflation which people dint expect to occur, as a result of which they remains unprepared for the situation. Thus those who holds cash are penalised the most(b)

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.