If the Nominal Interest Rate Falls, and the Expected Inflation

question 20

Multiple Choice

If the nominal interest rate falls, and the expected inflation rate rises, we know that the real interest rate:

• A) will decrease.
• B) will decrease, but only if the decrease in the nominal rate is smaller than the increase in expected inflation.
• C) cannot be defined.
• D) will increase.
• E) will increase, but only if the decrease in the nominal rate is greater than the increase in expected inflation.

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Definitions:

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The ability to move or be moved freely and easily, often discussed in terms of social mobility (changes in social status) and geographic or physical mobility.

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