You Notice That When the Inflation Rate Increases, the Interest

question 528

Multiple Choice

You notice that when the inflation rate increases, the interest rate tends to increase. This observation indicates that

• A) a cross- section graph of the inflation rate and the interest rate will show a positive relationship.
• B) higher inflation rates must cause a higher interest rate.
• C) a scatter diagram of the inflation rate and the interest rate will show a positive relationship.
• D) there might be false causality between inflation and the interest rate.

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