When Money Is Neutral, an Increase in the Rate of Inflation

question 27

Multiple Choice

When money is neutral, an increase in the rate of inflation from 2 per cent to 5 per cent will _____.

• A)increase the nominal interest rate by 3percentage points
• B)increase the real interest rate by 3 percentage points
• C)decrease the nominal interest rate by 3 percentage points
• D)increase the nominal interest rate by less than 3 percentage points

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Definitions:

Détente-Style Diplomacy

A strategy aimed at easing geopolitical tensions between nations, characterized by negotiation and cooperation rather than confrontation.

Zbigniew Brzezinski

A political scientist and statesman who served as United States National Security Advisor under President Jimmy Carter from 1977 to 1981, notable for his role in U.S. foreign policy during the Cold War.

Cyrus Vance

Cyrus Vance was a distinguished American lawyer and politician, serving as the United States Secretary of State under President Jimmy Carter.

Soviet Intervention

The use of military or political force by the Soviet Union in other countries to support its own interests, commonly seen during the Cold War era.