There Is an Inverse Relationship Between Real GDP and Inflation

question 46

Multiple Choice

There is an inverse relationship between real GDP and inflation because

• A)an increase in inflation leads to a higher interest rate, which leads to an increase in real GDP.
• B)an increase in inflation leads to a higher interest rate, which leads to a decrease in potential GDP that causes real GDP to decline.
• C)an increase in inflation leads to a higher interest rate, which leads to a decrease in real GDP.
• D)an increase in inflation leads to a lower interest rate, which leads to a decrease in real GDP.
• E)a decrease in inflation leads to a higher interest rate, which leads to a decrease in real GDP.

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