In the New Keynesian Rational Expectations Model, When the Nominal

question 33

Multiple Choice

In the New Keynesian Rational Expectations model, when the nominal interest rate is constant forever,

• A) in the long run, the inflation rate equals the natural real rate of interest minus the nominal interest rate.
• B) in the long run, the inflation rate equals minus the natural real rate of interest minus the nominal interest rate.
• C) in the long run, the inflation rate equals minus the natural real rate of interest plus the nominal interest rate.
• D) in the long run, the inflation rate equals the natural real rate of interest plus the nominal interest rate.
• E) in the long run, the inflation rate explodes.

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