If the Slope of the Monetary Policy Rule Line Is

question 108

Multiple Choice

If the slope of the monetary policy rule line is 2, then when inflation rises by 1 percent, the

• A)nominal interest rate rises by 2 percent.
• B)nominal interest rate rises by 1 percent.
• C)nominal interest rate rises by 3 percent.
• D)real interest rate rises by 2 percent.
• E)real interest rate rises by 3 percent.

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Definitions:

Profits

The financial gain obtained when the revenue from business activities exceeds the expenses, taxes, and costs of operation.

Insolvent

A financial state in which an individual or entity cannot meet its debt obligations as they come due, or its liabilities exceed its assets.

Debt Payment

The act of paying back the principal and interest on borrowed money, typically according to a predetermined schedule.

Risk

The potential for losing something of value or the possibility of an adverse outcome.