According to the General MP Rule of the IS-MP-PC Model

question 27

Multiple Choice

According to the general MP rule of the IS-MP-PC model, a 1% increase in the inflation rate lead the central bank to:

• A)lower the real interest rate by 1%.
• B)not change the nominal interest rate.
• C)raise the real interest rate by more than 1%.
• D)raise the nominal interest rate by more than 1%.