10. If the nominal interest rate is 7 percent and expected inflation.docx

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10. If the nominal interest rate is 7 percent and expected inflation is 4.5 percent, then what is the expected real interest rate? A. 11.5 percent B. 7.0 percent C. 4.5 percent D. 2.5 percent E. less than 2.5 percent 11. Which of the following statements is (are) correct? (x) In the U.S., from the early 1980s through the early 1990s, both inflation and nominal interest rates fell. (y) If a country had deflation, the nominal interest rate would be less than the real interest rate. (z) For a given real interest rate an increase in inflation makes the after-tax real interest rate decrease, which discourages savings. A. (x), (y) and (z) B. (x) and (y) only C. (x) and (z) only D. (y) and (z) only

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