Answer:
C. Real Interest Rate = 2% and Nominal Rate = 5%
Explanation:
Given
Nominal Interest Rate = 5%
Expected Inflation Rate = 3%
Required
The new nominal rate
The real interest rate
First; We'll need to calculate the real interest rate
New Nominal Rate is calculated as thus;
![Nominal\ Rate = [(1 + Real\ Interest\ Rate) * (1 + Inflation\ Rate)] - 1](https://tex.z-dn.net/?f=Nominal%5C%20Rate%20%3D%20%5B%281%20%2B%20Real%5C%20Interest%5C%20Rate%29%20%2A%20%281%20%2B%20Inflation%5C%20Rate%29%5D%20-%201)
![Nominal\ Rate = [(1 + 2\%) * (1 + 3\%)] - 1](https://tex.z-dn.net/?f=Nominal%5C%20Rate%20%3D%20%5B%281%20%2B%202%5C%25%29%20%2A%20%281%20%2B%203%5C%25%29%5D%20-%201)
![Nominal\ Rate = [(1 + 0.02) * (1 + 0.03)] - 1](https://tex.z-dn.net/?f=Nominal%5C%20Rate%20%3D%20%5B%281%20%2B%200.02%29%20%2A%20%281%20%2B%200.03%29%5D%20-%201)
![Nominal\ Rate = [(1.02) * (1.03)] - 1](https://tex.z-dn.net/?f=Nominal%5C%20Rate%20%3D%20%5B%281.02%29%20%2A%20%281.03%29%5D%20-%201)
![Nominal\ Rate = [(1.02 * 1.03)] - 1](https://tex.z-dn.net/?f=Nominal%5C%20Rate%20%3D%20%5B%281.02%20%2A%201.03%29%5D%20-%201)
Convert to Percentage
(Approximated)
Answer:
I would say A
Explanation:
Cant be D because cheaper labor would attract more companies
While lower company taxes may seem nice, it does not make up for high production costs
And infrastructure would be better, but that generally goes with higher taxes and wages.
A Perfect example is Bangladesh and other countries like it vs Europe and North America
Bangladesh has bad infrastructure, less wages, etc. but it has lower production costs because there are fewer regulations and protection plans. Therefore, more production of shoes or clothing there rather than Western civilization.
Fines for speeding in school zones may be enhanced. For example, many authorities double speeding fines in school zones.
So probably is C, fines are doubled.
