Suppose People Expect There to Be a Substantial Increase in the Rate

question 70

Multiple Choice

Suppose people expect there to be a substantial increase in the rate of inflation over the next few years. Which of the following would you predict?

• A)An increase in the real interest rate and a decrease in the nominal interest rate
• B)No increase or decrease in the nominal and real interest rates
• C)A constant nominal interest rate and a higher real interest rate
• D)A higher nominal interest rate
• E)A decline in the nominal interest rate

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Definitions:

Wedge Issue

A controversial political or social issue used by a party or group to divide opponents or unite supporters.

Illegal Immigration

The act of moving into or residing in a country without the legal permission of the government.

Foreign Policy

A government's strategy in dealing with other nations, involving diplomacy, security, and economic interests.