Neco Model Questions Vol1 2023 Economics Question 39

Practice objective / multiple choice question 39 from the 2023 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2023 Economics Objective / Multiple Choice Medium Difficulty
Question 39 NECO_MODEL_QUESTIONS_VOL1 • 2023 • ECONOMICS • objective

The consumer price index (CPI) was 152 in January 2025 and 165 in December 2025. Compute the average annual inflation rate. If the nominal interest rate on a savings account is 12 % per annum, determine the approximate real interest rate using the Fisher approximation. Finally, a government bond yields a nominal rate of 8 %; does it provide a positive real return?

Answer Options

A. Inflation = 8.00 %; Real interest ≈ 3.00 %; Bond real return ≈ -0.50 % (negative)
B. Inflation = 9.20 %; Real interest ≈ 4.20 %; Bond real return ≈ -0.20 % (negative)
C. Inflation = 7.80 %; Real interest ≈ 2.80 %; Bond real return ≈ 0.20 % (positive)
Correct Answer D. Inflation = 8.55 %; Real interest ≈ 3.45 %; Bond real return ≈ -0.55 % (negative)
Correct Answer
D
Correct Option:
Inflation = 8.55 %; Real interest ≈ 3.45 %; Bond real return ≈ -0.55 % (negative)

About This Question

This is Neco Model Questions Vol1 2023 Economics Question 39. It is one of the objective questions from the 2023 Neco Model Questions Vol1 Economics examination.

Difficulty level: Medium .

View More Neco Model Questions Vol1 2023 Economics Questions More Neco Model Questions Vol1 Practice Questions Back to Questions

Master the Exam!

You've seen a preview, but there are thousands more questions plus AI tutor to break down complex solutions.

Unlock Full Access Available for Android & Windows
Chat with Support