If the inflation rate is 5 percent and the real interest rate is ...

[Davideckstein7]

If the inflation rate is 5 percent and the real interest rate is 2.5 percent, then the nominal interest rate is
 
  A) 10 percent. B) -2.5 percent. C) 2.5 percent. D) 7.5 percent. E) 2 percent.

Question 2

An example of the outlet substitution bias in the calculation of the CPI is a price increase in
 
  A) a trip to Mexico for a couple that had previously taken vacations in Europe.
  B) a 2014 Honda Civic relative to a 2004 Honda Civic.
  C) GPS units versus AAA map books.
  D) textbooks bought through the campus bookstore relative to textbooks via Craigslist.
  E) olive oil versus vegetable oil.

[Natalie4ever]

Answer to Question 1

D

Answer to Question 2

D