Which of the following is incorrect?
A. The nominal interest rate is the rate of interest expressed in terms of current dollars.
B. The real interest rate is the rate of interest expressed in terms of dollars of constant or
inflation-adjusted value.
C. The nominal interest rate is the real interest rate less the rate of inflation.
D. During periods of inflation, the nominal interest rate will exceed the real interest rate.
Answer: C
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An increase in each of the following factors would normally provide a subsequent increase in quantity demanded, except:
a. price of substitute goods b. level of competitor advertising c. consumer income level d. consumer desires for goods and services e. a and b
As the price of gasoline rose during the 1970s, consumers cut back on their use of gasoline relative to other consumer goods. This situation contributed to which bias in the consumer price index?
a. Substitution bias. b. Transportation bias. c. Quality bias. d. Indexing bias.