Question : 21) Suppose the nominal interest rate a savings bond 7 : 1238104

21) Suppose the nominal interest rate on a savings bond is 7 percent a year and the inflation rate is 4.5 percent a year. How much is the real interest rate?

A) 1.56 percent

B) 11.5 percent

C) 2.5 percent

D) 7 percent

E) 4.5 percent

22) If the inflation rate is 2.5 percent and the nominal interest rate is 10 percent, then the real interest rate is

A) 2.5 percent.

B) 7.5 percent.

C) -7.5 percent.

D) -2.5 percent.

E) 12.5 percent.

23) If the inflation rate is 5 percent and the real interest rate is 2.5 percent, then the nominal interest rate is

A) -2.5 percent.

B) 2 percent.

C) 7.5 percent.

D) 2.5 percent.

E) 10 percent.

24) If the real interest rate is 8 percent and the inflation rate is 2.5 percent, then the nominal interest rate is

A) 10.5 percent.

B) 2.5 percent.

C) 5.5 percent.

D) 8 percent.

E) 3.2 percent.

25) Barbara is willing to loan $10,000 if she can earn a real interest rate of 6 percent. Everything else the same, if the inflation rate is 2 percent, she would agree to loan the $10,000 if the nominal interest rate is

A) 4 percent.

B) 10 percent.

C) 3 percent.

D) 8 percent.

E) 12 percent.

26) Barbara is willing to loan $10,000 if she can earn a real interest rate of 6 percent. Everything else the same, if the inflation rate is 2 percent, she would agree to loan the $10,000 if the nominal interest rate is ________ because ________.

A) 8 percent; she would earn more than her desired amount of 6 percent

B) 4 percent or higher; she would not earn her desired amount of 6 percent if the nominal interest rate was any lower

C) 4 percent or lower; she would not earn her desired amount of 6 percent if the nominal interest rate was any higher

D) 8 percent or higher; she would not earn her desired amount of 6 percent if the nominal interest rate was any lower

E) 8 percent or lower; she would not earn her desired amount of 6 percent if the nominal interest rate was any higher

27) Assume you have a credit card balance of $2,000 at 15 percent and the inflation rate is 3 percent. What are the nominal and real interest rates?

A) 15 percent nominal and 3 percent real

B) 3 percent nominal and 12 percent real

C) 15 percent nominal and 12 percent real

D) 15 percent nominal and 18 percent real

E) 12 percent nominal and 15 percent real

28) The nominal interest rate is 12 percent and the inflation rate is 4 percent. The opportunity cost of holding a dollar for a year is

A) 12 cents.

B) 16 cents.

C) 88 cents.

D) 8 cents.

E) 48 cents.

29) The opportunity cost of holding money

A) increases as the nominal interest rate increases.

B) decreases as the nominal interest rate increases.

C) does not change with the changes in the nominal interest rate.

D) is fixed at all interest rates.

E) is the price level.

30) The demand for money curve shows the relationship between the quantity of money demanded and

A) the nominal interest rate.

B) the real interest rate.

C) the inflation rate.

D) the price level.

E) real GDP.