If the Rate of Inflation Equals Zero, Then the Real

question 16

Multiple Choice

If the rate of inflation equals zero, then the real rate of interest:

• A)equals zero.
• B)equals the nominal rate of interest.
• C)can be negative.
• D)equals the target real interest rate.

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Definitions:

Tax

A compulsory financial charge or levy imposed by a government on individuals or entities to fund public expenditures.

Good

A tangible item that is produced or manufactured for sale to consumers in the market.

Market Equilibrium

A condition or state where the supply of a good matches its demand, leading to a stable market price for the good.

Good

A tangible product or item that satisfies some human desire or need, often available for sale in the market.