Assume you borrow funds to buy a new car at 3 percent interest and you think that the economy-wide rate of inflation over the life of the loan will be 2 percent. If you are correct in your assumption, your real rate of interest on the car loan will be
A) 1 percent.
B) 2 percent.
C) 3 percent.
D) 5 percent.
Correct Answer:
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