An Increase in Expected Inflation Causes the Real Interest Rate

question 57

Multiple Choice

An increase in expected inflation causes the real interest rate to ________ and output to ________ in the short run,before prices adjust to restore equilibrium.

• A)rise; rise
• B)rise; fall
• C)fall; rise
• D)fall; fall

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Definitions:

Bearish Signal

An indication in financial markets suggesting that the price of an asset may decline.

Bullish Signal

An indicator that suggests an asset’s price is likely to rise. These signals are perceived through various forms of market analysis, including technical indicators and trends.

Relative Strength

A measure of the performance of a stock or financial asset compared to a market index or other stocks over a certain period.

Indicator

A statistic or measure that signals the condition or direction of the economy or financial markets.