If the Real Interest Rate Declines by 1 Percent and the Inflation

question 43

Multiple Choice

If the real interest rate declines by 1 percent and the inflation rate increases by 2 percent, the nominal interest rate must:

• A)increase by 2
• B)percent increase by 1 percent.
• C)remain constant.
• D)decrease by 1 percent.

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Definitions:

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