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