The Higher the Rate of Inflation, the Lower The

question 18

Multiple Choice

The higher the rate of inflation, the lower the:

• A)real interest rate can fall, as long as it is positive.
• B)nominal interest rate can fall, as long as it is positive.
• C)nominal interest rate can fall.
• D)real interest rate can fall.

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Definitions:

Ordinal

A type of qualitative data that represents categories with a meaningful order or ranking, but without a precise mathematical difference between them.

Mediating Variable

A variable that helps explain the relationship between the independent and dependent variables, acting as an intermediary in the cause-effect relation.

Direct Correlation

A relationship between two variables in which both either increase or decrease together.