For Central Bankers to Alter the Real Interest Rate by Changing

question 60

Multiple Choice

For central bankers to alter the real interest rate by changing the nominal interest rate, which of the following must be true?

• A) The rate of inflation has to remain constant.
• B) Inflation expectations are quite stable.
• C) The expected rate of inflation has to change.
• D) The change in the expected rate of inflation must equal the change in the nominal interest rate.

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