the economics of money, banking, and financial markets

108 #

© 2014 Pearson Canada Inc.#

9. 
   

   The interest rate that describes how well a lender has done in real terms after the fact is called
   the ____.
   A) ex post real interest rate
   B) ex ante real interest rate
   C) ex post nominal interest rate
   D) ex ante nominal interest rate
   Answer: A
   Diff: 1 Type: MC Page Ref: 78
   Skill: Recall
   Objective List: 4.3 Examine the distinction between real and nominal interest rates

   
   


10. 
    

    The ____ states that the nominal interest rate equals the real interest rate plus 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

    
    


11. 
    

    If the nominal rate of interest is 2 percent, and the expected inflation rate is -10 percent, the
    real rate of interest is ____.
    A) 2 percent
    B) 8 percent
    C) 10 percent
    D) 12 percent
    Answer: D
    Diff: 1 Type: MC Page Ref: 78
    Skill: Applied
    Objective List: 4.3 Examine the distinction between real and nominal interest rates

    
    


12. 
    

    In which of the following situations would you prefer to be the lender?
    A) The interest rate is 9 percent and the expected inflation rate is 7 percent.
    B) The interest rate is 4 percent and the expected inflation rate is 1 percent.
    C) The interest rate is 13 percent and the expected inflation rate is 15 percent.
    D) The interest rate is 25 percent and the expected inflation rate is 50 percent.
    Answer: B
    Diff: 3 Type: MC Page Ref: 79
    Skill: Applied
    Objective List: 4.3 Examine the distinction between real and nominal interest rates