107 #
© 2014 Pearson Canada Inc.#
The ____ states that the real interest rate equals the nominal interest rate minus the
expected rate of inflation.
A) Fisher equation
B) Keynesian equation
C) Monetarist equation
D) Marshall equation
Answer: A
Diff: 1 Type: MC Page Ref: 78
Skill: Recall
Objective List: 4.3 Examine the distinction between real and nominal interest rates
The Fisher equation states that ____.
A) the real interest rate equals the nominal interest rate plus the expected rate of inflation
B) the real interest rate equals the nominal interest rate less the expected rate of inflation
C) the nominal interest rate equals the real interest rate less the expected rate of inflation
D) the nominal interest rate equals the real interest rate plus the expected rate of inflation
Answer: B
Diff: 1 Type: MC Page Ref: 78
Skill: Recall
Objective List: 4.3 Examine the distinction between real and nominal interest rates
The nominal interest rate minus the expected rate of inflation ____.
A) defines the real rate of inflation
B) is a worse measure of the incentives to borrow and lend than is the nominal interest rate
C) is a more accurate indicator of the tightness of credit market conditions than is the nominal
interest rate
D) defines the bank rate
Answer: C
Diff: 3 Type: MC Page Ref: 78
Skill: Recall
Objective List: 4.3 Examine the distinction between real and nominal interest rates
The nominal interest rate minus the expected rate of inflation ____.
A) defines the real interest rate
B) is a less accurate measure of the incentives to borrow and lend than is the nominal interest
rate
C) is a less accurate indicator of the tightness of credit market conditions than is the nominal
interest rate
D) defines the bank rate
Answer: A
Diff: 3 Type: MC Page Ref: 78
Skill: Recall
Objective List: 4.3 Examine the distinction between real and nominal interest rates