Question 9
POST_UTME_RHEMA_UNIVERSITY
•
2023
•
ECONOMICS
•
objective
A country's inflation rate is 5% per annum. U\sing the concept of the Fisher equation, explain why the real interest rate will be higher than the nominal interest rate.
Answer Options
Correct Answer
A.
The real interest rate will be higher than the nominal interest rate because the Fisher equation states that the real interest rate is equal to the nominal interest rate minus the inflation rate.
B.
The real interest rate will be lower than the nominal interest rate because the Fisher equation states that the real interest rate is equal to the nominal interest rate plus the inflation rate.
C.
The real interest rate will be equal to the nominal interest rate because the Fisher equation states that the real interest rate is equal to the nominal interest rate minus the inflation rate.
D.
The real interest rate will be lower than the nominal interest rate because the Fisher equation states that the real interest rate is equal to the nominal interest rate minus the inflation rate.
Correct Answer
A
Correct Option:
The real interest rate will be higher than the nominal interest rate because the Fisher equation states that the real interest rate is equal to the nominal interest rate minus the inflation rate.
About This Question
This is
Post Utme Rhema University
2023
Economics
Question 9.
It is one of the
objective
questions from the
2023
Post Utme Rhema University
Economics
examination.