The Current Nominal Interest Rate Is 9 Percent

question 172

Multiple Choice

The current nominal interest rate is 9 percent. If the expected inflation rate changes from 2 to 3 percent ( ceteris paribus ) , it follows that the demand for loanable funds will

• A)rise by more than the supply of loanable funds will rise.
• B)rise by less than the supply of loanable funds will fall.
• C)fall by more than the supply of loanable funds will rise.
• D)rise by the same amount that the supply of loanable funds will rise.
• E)rise and the supply of loanable funds will fall to create a new higher nominal interest rate.

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