Q 314

The real rate of interest is defined as
A) zero.
B) the nominal rate of interest.
C) the nominal rate of interest minus the anticipated inflation rate.
D) the nominal rate of interest plus the anticipated inflation rate.

Q 315

The annual rate of inflation averaged 2 percent during the past decade, but borrowers and lenders anticipate that the price level will rise at a rate of 3 percent next year. The current nominal interest rate is 7 percent. The real rate of interest is
A) 10 percent.
B) 9 percent.
C) 5 percent.
D) 4 percent.

Q 316

Assume you borrow funds to buy a new car at 3 percent interest and you think that the economy-wide rate of inflation over the life of the loan will be 2 percent. If you are correct in your assumption, your real rate of interest on the car loan will be
A) 1 percent.
B) 2 percent.
C) 3 percent.
D) 5 percent.