If the nominal interest rate is 8 percent andrate of inflation is 5.5 percent, t

Question

If the nominal interest rate is 8 percent andrate of inflation is 5.5 percent, then the real interest rateis

A.   13.5 percent.

B.   12 percent.

C.   2.5 percent.

D.   -2.5 percent.

Part 2
Cedar Valley Furniture uses 5 workers working 8 hours to produce 80rocking chairs. What is the productivity of these workers?

A.   2 chairs per hour.

B.   1 hour per chair.

C.   80 chairs.

D.   None of the above is correct.

**(now im pretty sure the answer is A because each workers isproducing 2 chairs each, but I feel the question is not worded foran answer per worker but as a collective if so wouldn't the answerbe C?- Maybe I'm reading to much into this)** Pleasehelp

Explanation / Answer

1. C     2.5 percent Real interest rate = Nominal rate -inflation                              8 - 5.5 2. A   2 chairs per hr. the question is about productivity , not about the totaloutput.

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