Assume the Long-Term Nominal Interest Rate Is 7% and the Expected

question 91

Multiple Choice

Assume the long-term nominal interest rate is 7% and the expected inflation rate is 3%.If the Bank of Canada increases the money supply and as a result,the expected inflation rate increases to 5%,then based on the Fisher effect,the long-term real interest rate will

• A) remain at 4%.
• B) increase to 6%.
• C) fall to 3%.
• D) increase to 9%.

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Definitions:

Production Costs

Expenses incurred in the manufacturing or production process, including raw materials, labor, and overhead costs.

Average Product

The output produced per unit of input, calculated by dividing total output by the total number of units of the input used.

Nonlabor Resources

Resources used in the production of goods and services that do not involve labor, such as capital, land, and raw materials.

Worker

An individual who performs tasks or services for compensation; commonly refers to employees or laborers in various industries.