Suppose the Public Expects a 7 Percent Inflation Rate, and Both

question 31

Multiple Choice

Suppose the public expects a 7 percent inflation rate, and both the money supply and money demand grow at 7 percent a year. The Federal Reserve decides to keep the money growth rate at 7 percent. In the short run, we expect that

• A) real interest rates will remain constant.
• B) real interest rates may increase or decrease.
• C) real interest rates will decrease.
• D) real interest rates will increase.

---

Definitions:

Radio Frequency Identification System

A technology that uses radio waves to automatically identify and track tags attached to objects, which contain electronically stored information.

Pull Strategy

A marketing technique aimed at creating demand for products directly from consumers, leading retailers to "pull" the products from the distribution channels.

Marketing Strategy

A company's plan for reaching prospective consumers and turning them into customers of their products or services.

Custom Cabinetry

Tailor-made cabinetry designed and built to meet specific requirements and tastes of the customer.