The Neo-Fisherian Result That Increasing the Nominal Interest Rate Increases

question 18

Multiple Choice

The Neo-Fisherian result that increasing the nominal interest rate increases inflation is a startling one because

• A)it is wrong.
• B)it also holds in the Basic New Keynesian model.
• C)this result is obtained in a New Keynesian model that is usually used to justify conventional central banking ideas.
• D)Keynes would agree with it.
• E)Steve Poloz supports Neo-Fisherism.

---

Definitions:

Machine Operator Wages

Compensation paid to workers who operate machinery as part of the manufacturing process.

Product Costs

Expenses directly associated with the production of goods, including materials, labor, and factory overhead.

Direct Labor

The labor costs of all employees actually engaged in producing or directly working on a product.

Direct Materials

Raw materials that are directly used in the production of a product and can be easily traced back to the product.