The real interest rate equals the nominal interest rate ________ the inflation rate

You offer an extended warranty for your product that is purchased by a few customers. If the product typically fails 2% of the time, the claim rate will exceed 2% of warranty purchasers because

a. adverse selection will lead those who are more reckless to purchase the warranty b. moral hazard will lead those who purchase to be more reckless c. you systematically underestimate product failure rates d. A and B

The increase in the interest rate due to a higher expected inflation rate is called the __________ effect

A) expectations B) Fisher C) liquidity D) income E) a or b