What Would You Expect to Be the Relationship Between Real

question 4

Multiple Choice

What would you expect to be the relationship between real rates of interest in Japan and Canada if inflation is expected to be 3% in Japan and 6% in Canada?

• A)Japan's real interest rate should be 3% higher than in Canada.
• B)Japan's real interest rate should be 3% lower than in Canada.
• C)Japan's real interest rate should be half as high as in Canada.
• D)Real interest rates should be equal in both countries.

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Definitions:

µ ≠ 3

A statistical notation indicating the hypothesis that the population mean is not equal to 3.

Null Hypothesis

A default hypothesis that there is no effect or no difference, used as a starting point for statistical testing.

µ = 3

A notation indicating that the mean (average) of a certain dataset or population is equal to 3.

'>' Symbol

A mathematical symbol denoting that the value on the left is greater than the value on the right.